Investors who are looking to protect themselves against potential weakness in the equity market may benefit from investing in physical gold rather than gold stocks. According to George Milling-Stanley, the chief gold strategist at State Street Global Advisors, owning gold bars can provide an extra level of protection when the equity market experiences a downturn. Unlike gold mining stocks, which are equities and tend to mirror the performance of the general equity market, physical gold can offer investors a sense of security during volatile times.
State Street Global Advisors runs 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 at 0.40% and GLDM at 0.10%. This variance in costs also attracts different types of investors. For those who want to trade frequently or be tactical players, GLD’s liquidity and low trading costs make it a viable option. On the other hand, investors who have a long-term strategy and want to minimize expenses might find GLDM more suitable for their needs.
Contrary to the belief that gold is a traditional and outdated investment choice, State Street’s 2023 Gold ETF Impact Study revealed that millennials are allocating a significant portion of their portfolios to gold. This shift in perception is particularly noteworthy as younger investors are embracing gold while also showing interest in alternative assets like bitcoin. Although bitcoin may be seen as a competitor to gold in terms of attracting tactical investors looking to capitalize on price fluctuations, the two assets serve different purposes in a diversified portfolio.
Recent surveys have indicated that millennials are more likely to own bitcoin than any other generation, while Generation Z is more inclined to invest in bitcoin over traditional assets like stocks, bonds, or real estate. Despite the growing popularity of bitcoin among younger investors, gold remains a valuable asset for those seeking stability and long-term growth. While both assets may compete for a tactical position in investors’ portfolios, their unique characteristics cater to different investment strategies and risk profiles.
Investing in physical gold can offer investors a sense of security and protection during volatile market conditions. While gold stocks may be impacted by fluctuations in the equity market, physical gold serves as a reliable store of value and a hedge against economic uncertainty. By understanding the key differences between gold ETFs and recognizing the shifting perceptions of gold as an investment, investors can make informed decisions about incorporating gold into their portfolios for long-term wealth preservation.
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