In a volatile market, investors are often looking for ways to protect their assets and hedge against potential weaknesses in the equity market. George Milling-Stanley, the chief gold strategist at State Street Global Advisors, suggests that owning physical gold may be a better option than investing in gold stocks. According to Milling-Stanley, gold bars offer a level of protection that gold mining stocks do not. When the equity market takes a downturn, gold mining stocks, as equities, tend to follow suit and decline along with the broader market. This lack of correlation with the equity market makes physical gold a more attractive option for investors looking to safeguard their portfolios.
State Street Global Advisors offers two exchange-traded funds that track the performance of the spot price of gold: the SPDR Gold Shares ETF (GLD) and SPDR Gold MiniShares Trust (GLDM). These two funds differ in their gross expense ratios, with GLD having a ratio of 0.40% and GLDM’s ratio at 0.10%. Milling-Stanley points out that this key distinction also attracts different types of investors to each fund. For investors who are looking to trade frequently or be tactical players in the market, GLD’s liquidity and low trading costs make it a suitable option. On the other hand, investors who want to make a long-term investment in gold may find GLDM more appealing due to its lower expense ratio.
Both GLD and GLDM have shown positive performance year to date, with a 15% increase as of Thursday’s close. The perception of gold as a traditional and outdated investment no longer holds true, as indicated by State Street’s 2023 Gold ETF Impact Study. The study found that millennials have a significant portion of their portfolios allocated to gold, showing a shift in interest towards the precious metal among younger generations. This growing popularity of gold among younger investors comes at a time when bitcoin is gaining traction among millennials and Generation Z.
While bitcoin is seen as a competitor to gold in the investment space, particularly among those looking to capitalize on price movements, Milling-Stanley believes that the two assets serve different purposes. Bitcoin may attract investors who are looking for quick gains through trading, while gold remains a more stable and reliable option for long-term investment strategies. The Policygenius survey further highlights the differences in ownership preferences among different generations, with millennials showing a greater inclination towards bitcoin and gold compared to older generations.
The choice between investing in physical gold or gold stocks ultimately depends on individual investment goals and risk tolerance. While gold stocks may offer higher returns in a booming market, physical gold provides a sense of security and stability during times of market uncertainty. Both options have their pros and cons, and investors should carefully consider their investment strategies before making a decision.