Amid Economic, Geopolitical Uncertainties, Majority of Financial Advisors Expect To Increase or Maintain Allocations To Gold
State Street Global Advisors and the World Gold Council's recent Gold Perceptions Survey reveals that 87% of North American financial advisors allocate assets to gold. Notably, 29% plan to increase their gold investments in the next 12 to 18 months, while 62% will maintain their current levels. Gold is mainly favored for its role as a portfolio diversifier amid economic and geopolitical uncertainties. The survey highlights that physically backed gold ETFs are the preferred investment vehicle, comprising 40% of advisors' gold investments. The top reasons for investing in gold include its historical value stability and client demand, although barriers like lack of dividends and valuation challenges persist.
- 87% of North American financial advisors currently allocate assets to gold.
- 29% of financial advisors plan to increase gold investment over the next 12 to 18 months.
- Gold is seen as a core asset for long-term investment and portfolio diversification.
- Physically backed gold ETFs are the most popular investment vehicle, accounting for 40% of advisors' gold investments.
- 54% of financial advisors cite the lack of coupons or dividends as a barrier to gold investment.
- Gold's intrinsic value is difficult to calculate due to the lack of an established model (28%).
Insights
The findings from State Street Global Advisors and the World Gold Council highlight the consistent role of gold as a portfolio diversifier, especially during times of economic and geopolitical uncertainty. From a financial perspective, the anticipated trend of maintaining or increasing allocations to gold aligns with historical patterns during turbulent times. Financial advisors' belief in gold's enduring value and its effectiveness as a hedge against inflation and currency devaluation underpins this sentiment.
Gold ETFs, particularly physically backed ones, are preferred vehicles due to their liquidity, ease of trading and lower management fees compared to other gold investment options. This preference also reflects a shift towards more transparent and straightforward investment tools. As interest rates are predicted to be cut in the next year, retaining or increasing gold allocations suggests advisors are prioritizing stability and protection over yield.
For retail investors, it’s critical to note that while gold does not offer dividends or interest, its role in mitigating risk during volatile periods can be invaluable. Diversification with gold could potentially cushion portfolios against broader market downturns, but it’s also essential to balance this with assets that provide income and growth potential.
The survey's results reflect a broader market sentiment where investors are seeking safe havens. The high percentage of advisors already allocating to gold (87%) and the significant portion looking to maintain or increase this allocation indicates strong confidence in gold's stability. The preference for gold ETFs over other gold investments underscores the importance of liquidity and accessibility in investment choices.
Gold's appeal as a diversifier is well-founded; it typically has a negative correlation with other asset classes, meaning it tends to perform well when other investments falter. This characteristic is particularly valuable during periods of market volatility driven by economic and geopolitical issues.
However, potential investors should consider the drawbacks mentioned: gold’s lack of yield and the challenges in valuing it. These factors can limit its attractiveness compared to income-generating investments. Also, the perception of gold as speculative might deter more risk-averse investors.
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Vast Majority of Advisors (
87% ) Currently Allocate Assets to Gold
- Role as a Portfolio Diversifier is Top Reason Cited For An Allocation to Gold
- Physically Backed Gold ETFs Attract Most Assets
“While interest rates are widely expected to be cut during the next 12 months, advisors’ allocations to gold have remained fairly consistent,” said George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors. “This suggests that a growing majority of advisors are using gold as a core asset for long-term investment horizons, which is where it shines in the context of a well-balanced, diversified portfolio.”
Across all North American financial advisors, nearly 9 in 10 (
-
32% have less than1% of total client assets under management allocated to gold; -
56% have between1% and4.9% of assets allocated to gold; and -
13% have5% or more of assets allocated to gold.
The vehicle of choice for allocating assets to gold is physically backed gold ETFs, which on average account for
"The recent gold price rallies have piqued investor interest, and with good reason amidst today's economic and geopolitical uncertainty," said Joseph Cavatoni, senior market strategist at the World Gold Council. "Many investors and advisors alike used to look at specific factors, like interest rates and the dollar, in isolation when considering an allocation to gold. But as a global asset with a multitude of both strategic and tactical drivers that are supporting demand, a strong case can be made for gold in the year ahead.”
The top three reasons cited by financial advisors for investing in gold or increasing exposure to the precious metal include:
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Gold is a proven diversifier, especially in periods of financial turmoil and economic uncertainty (
48% ) -
Gold has stood the test of time as a safe and proven store of value (
36% ) -
Our clients express a desire to invest in gold (
35% )
Conversely, the most frequently cited barriers that hinder investment into gold include:
-
Gold does not pay coupons or dividends (
54% ) -
Gold's intrinsic value is difficult to calculate due to a lack of an established model (
28% ) -
Gold is viewed as a speculative investment (
26% )
About the Gold Perceptions Survey
State Street Global Advisors and the World Gold Council conducted a survey of 400 financial advisors in
About World Gold Council
We are a membership organisation that champions the role gold plays as a strategic asset, shaping the future of a responsible and accessible gold supply chain. Our team of experts builds understanding of the use case and possibilities of gold through trusted research, analysis, commentary, and insights. We drive industry progress, shaping policy and setting the standards for a perpetual and sustainable gold market.
You can follow the World Gold Council on X (Twitter) at @goldcouncil and LinkedIn.
About State Street Global Advisors
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. As pioneers in index and ETF investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US
*Pensions & Investments Research Center, as of 12/31/22.
†This figure is presented as of March 31, 2024 and includes ETF AUM of US
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FAQ
What percentage of financial advisors currently allocate assets to gold according to the Gold Perceptions Survey?
How many financial advisors plan to increase their gold investments in the next 12 to 18 months?
What is the most popular vehicle for financial advisors to invest in gold?
What are the top reasons financial advisors invest in gold?
What are the main barriers to investing in gold according to financial advisors?
