SSGA study shows financial advisors going for the gold

There’s gold in them thar portfolios. And a new study expects there to be even more soon.

A report from State Street Global Advisors and the World Gold Council released this week showed 29 percent of financial advisors in North America plan to increase allocations to gold over the next 12 to 18 months, 62 percent plan to stand pat on their gold holdings and 9 percent believe they will lower the percentage of client assets invested in gold.

Gold is up over 12 percent thus far in 2024 and over 20 percent in the past 12 months.

“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 in a statement. “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.”

"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.”

State Street Global Advisors and the World Gold Council conducted the survey of 400 financial advisors in North America with $100 million or more in total assets during the fourth quarter of 2023.

Elsewhere, the survey showed nearly 9 in 10 advisors currently allocate assets to gold with nearly a third having less than 1 percent of total client assets under management allocated to the yellow metal, leaving room for growth. The study said 56 percent have between 1 percent and 4.9 percent of assets allocated to gold while 13 percent have allocations of 5 percent or more.

As to how advisors are holding the shiny stuff for clients, the study said the vehicle of choice is physically backed gold ETFs (40 percent) followed by gold mining ETFs (16 percent), gold mutual funds (16 percent), and index or multi-asset funds that include gold or gold-mining stocks (16 percent).

Christopher P. Davis, partner at Hudson Value Partners, finds the royalty space to be the most attractive way to add gold exposure to a portfolio.

“In a world of expensive, leveraged, and complex alternative investments, we think the long-term record of gold gives most absolute return style funds underappreciated competition. Gold safeguards purchasing power in a world of debauched fiat currencies,” said Davis.

Cyrus Amini, chief investment officer at Helium Advisors, has maintained a strategic exposure to gold, and believes it prudent to keep that allocation going forward.

“The interest rate picture is uncertain going forward and volatility in the markets should continue to drive capital flows toward safe havens such as gold,” said Amini.

Still, despite gold’s growing popularity, Will Sterling, partner at TritonPoint Wealth, believes it fails to warrant a fixed allocation from a strategic asset allocation perspective alongside public equities, public bonds, and private market investments. 

“Generally, over longer periods gold has had a strong negative correlation to the US dollar. The Fed will soon begin cutting rates toward a more neutral funds rate, but that doesn’t necessarily mean we’ll see a weak dollar as its important to recall the strength or weakness of the US dollar is relative to other currencies and where they are in their cycle," said Sterling.