Why Physical Gold Might Be the Best Hedge Against Market Volatility
When it comes to navigating a volatile market, opting for physical gold over gold stocks might be the optimal strategy. George Milling-Stanley, an expert in gold and the chief gold strategist at State Street Global Advisors, believes that holding physical gold bars can provide protection against potential weaknesses in the equity market. According to Milling-Stanley, gold mining stocks are still equities and tend to follow the general trend of the equity market, offering limited protection compared to physical gold.
The Benefits of Investing in Gold ETFs
- State Street Global Advisors runs two exchange-traded funds that track the performance of the spot price of gold: SPDR Gold Shares ETF (GLD) and SPDR Gold MiniShares Trust (GLDM).
- GLD has a gross expense ratio of 0.40%, while GLDMโs ratio is 0.10%.
- GLD is more suitable for active traders due to its liquidity and lower trading costs, while GLDM is preferred for long-term investors looking for lower expense ratios.
- As of the latest data, both GLD and GLDM have seen a 15% increase in value year to date.
Bullion, Bitcoin, and Boomers: The Changing Investment Landscape
Contrary to the perception of gold as a traditional investment favored by older generations, millennials are increasingly allocating more of their portfolios to gold. In a study by State Street, millennials were found to have a higher proportion of gold investments compared to older age groups.
While bitcoin remains popular among millennials and Generation Z, George Milling-Stanley doesnโt see gold and bitcoin as direct competitors for investment assets. While bitcoin may attract tactical investors looking for short-term gains, goldโs appeal lies in its long-term strategic value as a hedge against market fluctuations.
Hot Take: The Gold Standard for Diversifying Your Portfolio
Considering the current market volatility, diversifying your investment portfolio with physical gold or gold ETFs could offer stability and protection against the uncertainty of the equity market. While gold mining stocks are a viable investment option, they may not provide the same level of security as physical gold in times of market downturns. By strategically allocating a portion of your portfolio to gold, you can enhance risk management and potentially improve overall returns in the long run.
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