Belief in gold seems to be waning

Younger people in particular seem to believe that stocks will perform better than the shiny precious metal at the moment. Right?

Will gold coins continue to rise in value?

Dhe gold price has suffered a serious setback in the past few days: it lost around 5 percent within a week by Friday, the largest weekly loss in 15 months, as the analysts at Commerzbank write. At times the price fell below $ 1,770 a troy ounce (31.1 grams). The reason given was the announcement by the US Federal Reserve (Fed), which had promised higher interest rates. Alexander Zumpfe, gold trader at the precious metals group Heraeus, says that this has depressed the price of gold in two ways. A stronger dollar, however, makes gold more expensive outside the dollar area and thus tends to reduce demand, which in turn puts pressure on the price.

Many private investors now apparently no longer believe gold will soar in prices as it did last year. At least that is the result of a survey that the gold trading company Pro Aurum commissions the opinion research institute Forsa to carry out once a year. The results show a remarkable change compared to the previous year: when asked which investment they thought they would make the most profit in the next three years, most of them by far said “gold” last year. This year, the front runner was “stocks” – again by a long way. The number of advocates for gold fell from 31 to 23 percent, the lowest level in at least ten years. The number of share proponents, on the other hand, rose from 25 to 32 percent, the highest value in ten years.

Gold as protection against inflation

There are many reasons why this change could have started. The gold price has already skyrocketed, the crisis is easing somewhat – some investors may believe that stocks will perform better than gold, the currency in crisis. Even so, it remains a bit strange because in the branches of gold dealers many customers say that they are afraid of inflation and now see an increase in official inflation rates. Many felt confirmed in their feeling that inflation had always been higher than officially reported, at least reports Robert Hartmann from Pro Aurum. Perhaps for such investors, however, the security of gold is more important than its performance.

In any case, the Forsa survey shows that there are considerable differences between the generations when it comes to belief in gold. The group of investors between the ages of 45 and 59 still believe in gold the most. In this group, the precious metal is believed to have the greatest performance of all financial investments over the next three years, far ahead of stocks. But both older people, many of whom apparently hardly trust any asset class at all, and the younger ones see it differently. In the group between 18 and 29 years of age, the proportion who, at least verbally, has the most confidence in stocks rose from 31 to 43 percent within a year, the highest value in the survey.

Gold purchases in the first few months of the year

Now it could be different which asset class someone theoretically believes to have the greatest performance and where they actually invest. In the case of gold, in particular, this could play a role because the expected performance for private investors is often not the decisive purchase motive. The study also asked: 7 percent owned gold bars or gold coins, and 5 percent owned silver bars or silver coins. In the case of gold, this is a slightly lower value compared to the previous year, but not a spectacular change. It is still interesting because the gold dealers and the industry organization World Gold Council had reported brisk buying activity in physical gold in the first few months of this year; but of course that doesn’t necessarily have to have pushed the number of gold owners up. In any case, the representative survey results are relatively up-to-date; around 1000 adults in Germany were surveyed between June 7 and 10.

With regard to the actual ownership of gold and shares, the distribution across the age groups looks different than the expectations for future opportunities: The high number of younger people who think shares are good apparently does not correlate with the actual ownership of such securities. In practice, the respondents in the group between 18 and 29 years of age who had praised the shares in this way mainly had a call money account (24 percent) and fund shares (23 percent). There was a high percentage of shareholders at 20 percent, especially in the group aged 45 to 59; probably due to the financial situation. This is also the group in which real estate (40 percent) and life insurance (43 percent) are particularly widespread.