(Kitco News, Thurs. June 29th, 2023) – Significant risks that the global economy will fall into a recession as central banks worldwide continue to raise interest rates aggressively will provide long-term support for the gold market, according to the latest research from State Street Global Advisors.
The firm’s latest gold investment study, published Monday, showed that investors have become a lot more tactical in their investment strategy, opting for low-cost precious metals products. State Street’s latest study was published in recognition of the fifth anniversary of the launch of SPDR Gold MiniShares Trust (NYSE: GLDM).
The firm noted that GLDM has become a leader among low-cost gold ETFs in the market, with assets under management growing to $6.2 billion in the last five years.
“Since its launch, GLDM has grown to be the third largest gold ETF in the U.S.,” State Street said in its report.
Currently, the mini-ETF holds 100.58 tonnes of gold with inflows of 12 tonnes so far this year. The world’s largest ETF, SPDR Gold Shares (NYSE: GLD), has seen inflows of 9.46 tonnes of gold year-to-date.
“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,” said George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors.,” said George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors 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.”
Although gold has struggled to attract consistent bullish attention as prices have dropped below $1,950 an ounce, the study from State Street, which included a survey of investors, shows that investor demand for the precious metal remains healthy.
According to the survey results, 20% of U.S. investors currently have gold in their portfolios. Among these investors, the average gold allocation is 14% of portfolio assets, and 47% hold gold ETFs.
“According to the study, among investors who invest in gold, more than half are likely to increase their investment in the next 6-12 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.
The study also revealed a new trend growing in the marketplace: investors are getting younger.
The report said that, on average, Millennials have a higher percentage of gold, around 17%, in their investment portfolio. Both Gen X and Boomers hold about 10% of their portfolio in gold, respectively.
Milling-Stanley noted that an area of growth for the gold market remains on the educational side. He said that while investors continue to see value in the precious metal, many generalists don’t know what drives the price.
“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,” said Milling-Stanley 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.”
In a recent interview with Kitco News, Milling-Stanley said that he was less concerned about rising interest rates as the Federal Reserve maintains its aggressive hawkish stance, looking to raise interest rates two more times this year.
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Gold bulls should focus on long-term protection, not short-term opportunity costs – State Street’s George Milling-Stanley |
Although rising interest rates increase gold’s opportunity costs as a nonyielding asset and support the U.S. dollar, Milling-Stanley said that the Fed’s stance also pushes the world closer to a recession.
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com