George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, joined Keith Black, Managing Director of RIA Channel, to discuss the gold market of the last twenty years and the impact that ETFs have had on the gold markets.
It has been twenty years since State Street Global Advisors launched the SPDR(®) Gold Shares (GLD(®)). GLD democratized gold investments, making it feasible for individual investors to access the gold market and overcome the prior barriers to investment.
Over the last twenty years, the jewelry market has declined from 80% of demand to 50%, while investment demand has grown from 10% to 30% of the gold market, with central bank purchases now reaching 15% of demand.1 A key driver of gold demand over the last fourteen years has been purchases by emerging markets central banks seeking to diversify their reserves relative to large US dollar holdings.
The SSGA 2024 Gold ETF Impact Study surveyed individuals with over $250,000 in investable assets. Of those surveyed, 38% of ETF buyers owned gold prior to their ETF purchase, up from 20% in the prior year survey. Among US demographic cohorts, a larger percentage of surveyed millennials own gold (61%) relative to Generation X (35%) or baby boomers (20%).2
Surveyed individuals added gold to their portfolios for protection and diversification, as it has historically delivered a low correlation to both stocks and bonds and protection during times of weak equity markets. Gold has also offered protection from sustained high inflation, such as a two-year period when inflation exceeds 5%.
Gold historically had an inverse correlation to the US dollar, strengthening during times of dollar weakness and weakening during times of dollar strength. Since 2008, gold has experienced an asymmetric relationship relative to the US dollar, with gold strengthening when the dollar is weak, with little correlation between gold prices during times of a strong US dollar.3 If the Fed continues cutting interest rates, the dollar could potentially weaken, providing a tailwind for gold prices.
Resources:
Footnotes:
1 Source: World Gold Council – Gold Demand Trends and State Street Global Advisors, data as of October 30, 2024.
2 State Street Global Advisors, 2024 Gold ETF Impact Study, July 2024.
3 Source: Bloomberg Finance L.P. & State Street Global Advisors, data as of November 30, 2024. Note: Gold is represented by LBMA Gold Price PM US$/oz. and U.S. dollar represented by U.S. Dollar Index. Past performance is not a reliable indicator of future performance
Important Risk Information
Investing involves risk including the risk of loss of principal.
Investing involves risk, and you could lose money on an investment in SPDR® Gold Trust (“GLD®” or “GLD”).
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs’ net asset value. Brokerage commissions and ETF expenses will reduce returns.
Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.
Diversification does not ensure a profit or guarantee against loss.
Investing in commodities entails significant risk and is not appropriate for all investors.
Important Information Relating to GLD:
GLD has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents GLD has filed with the SEC for more complete information about GLD and this offering. Please see the GLD prospectus for a detailed discussion of the risks of investing in GLD shares. The GLD prospectus is available by clicking here. You may get these documents for free by visiting EDGAR on the SEC website at sec.gov or by visiting spdrgoldshares.com. Alternatively, GLD or any authorized participant will arrange to send you the prospectus if you request it by calling 866.320.4053.
GLD is not an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) and is not subject to regulation under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of GLD do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.
GLD shares trade like stocks, are subject to investment risk and will fluctuate in market value. The value of GLD shares relates directly to the value of the gold held by GLD (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them. GLD does not generate any income, and as GLD regularly sells gold to pay for its ongoing expenses, the amount of gold represented by each Share will decline over time to that extent.
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