According to recent research from State Street Global Advisors, concerning risks of a global recession are providing long-term support for the gold market, particularly as nations around the world continue their aggressive interest rate hike strategies. On Monday, the investment management firm released a gold investment study revealing how investors have gained a level of strategic planning in their investment portfolios, opting for lower-risk, lower-cost precious metals. One major finding from the study included the revelation that Millennials now carry a higher percentage of gold in their portfolios compared to other assets than Gen X or Boomers, showing that the younger generation is driving the demand for gold.
The study highlighted key figures relating to the SPDR Gold MiniShares Trust (GLDM) to celebrate its five-year launch anniversary. GLDM has quickly reached the top of its market category for low-cost gold ETFs, with its managed assets reaching $6.2 billion over the course of the last five years. “Since its launch, GLDM has grown to be the third largest gold ETF in the U.S.,” State Street explained in the report.
The mini-ETF carries 100.58 tons of gold, though this year has achieved inflows of 12 tons. To put this into perspective, the largest ETF in the world, SPDR Gold Shares (GLD), has a year-to-date record inflow of just 9.46 tons of gold. GLDM is excelling at unstoppable paces.
“At just 10 basis points, GLDM has proven to be a great low-cost choice for long-term buy and hold investors seeking access to the benefits of gold,” George Milling-Stanley, the chief gold strategist for State Street Global Advisors, explained in the report. “With recession risk still looming, the allure of gold as an investment in today’s market environment continues to be very strong.”
While physical gold may have shown recent levels of volatility in response to the Federal Reserve’s hawkish actions, investor demand has hardly swayed. Even as the precious metal dipped below $1,950 per ounce, a large percentage of investors held onto their portfolios, understanding that gold is a long-term game. The State Street study reflected this sentiment well.
Based on survey results, State Street revealed that 20% of investors in the U.S. carry gold in their portfolios. Of this group, the average investor allocates 14% of their portfolio to gold and 47% to gold ETFs. One in every five people investing in anything in the United States has chosen gold, and of that group, they’ve invested over half of their funds in the precious metal.
Based on the study, 73% of people investing in gold ETFs say that exposure in the market improved their portfolio performance.
Investors are nowhere near done purchasing gold, either. Based on study findings, investors who currently hold gold ETFs or bullion are over 50% likely to increase their holdings in the next year.
“According to the study, among investors who invest in gold, more than half are likely to increase their investment in the next six to 12 months, with the percentage of investors in gold ETFs (57%) slightly outweighing investors who may also hold other types of gold assets (e.g., bars and coins, gold mining stocks, commodity funds, etc.) at 53%,” the report said.
One of the most surprising trends revealed in the study might have been the age of this growing investor group. Gold investors are younger than they used to be.
The report showed that, on average, Millennials allocate 17% of their portfolios to gold, while Gen X and Boomers only allocate around 10%. Millennials are buying more gold than older generations.
Milling-Stenley explained how one major hesitation behind any gold investment is a lack of education and understanding of how the asset gains its value, which could explain a drop in the older generations. As educational materials become more complex with the rise in AI-based technology, a gap in education forms where older generations cannot gain a necessary understanding of market conditions.
According to the study, 80% of investors understand that gold is a secure asset that offers long-term monetary value, but only 41% understand what factors influence the market.
“Our Gold ETF Impact Survey indicates there is still significant room for more investor education about the benefits of gold and the role it can play in a portfolio,” Milling-Stanley explained in the report. “As the entire gold industry continues to improve the education around how to invest in gold and the portfolio benefits it can provide, we expect to see growth in gold investment demand.”
Many online resources, such as news articles, trend-related posts, and historical data, can provide key insights into the gold market. As always, investors should consult their financial advisors for portfolio support.
