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45% of Australians Never Thought About Investing in Gold At All

10 July 2018

This is the second article in a series of four about Australians investing in gold. Check out the first article here.

 

Earlier in the week, we looked at survey data which showed that over 85% of Australians don't invest in physical gold. Of course, at ABC Bullion, we wanted to identify the major barriers which are preventing Australians from holding gold in their portfolios. What we learned was staggering: 45% of Australians never even thought about investing in gold, and that’s not good for anybody.

 

ABC Survey Question 4

 

Because our survey went out to a general Australian population, it was important to us to benchmark some of our data against other data on investments. According to a 2017 study commissioned by the ASX, 60% of Australians hold investments outside their Super and the number of young investors is surging as rates of investment from 25-34 year olds grew from 24% to 39%. Unfortunately, our data shows that gold is more off the radar for 25-34 year olds (57% never thought about it) than it is for other age groups. So how is it that the world’s most coveted asset for millennia is largely being ignored despite an increase in investing appetite overall?

 

The ASX Survey went on to show that 60% of investors use some form of financial advice. Unfortunately, many institutional investors and financial intermediaries tend to dismiss gold as an investment, focusing on the fact that it doesn’t produce an income, and that in the short term, the gold price is volatile (much like the share market is).

 

These two characteristics (volatility and lack of income) are not the kind of attributes institutional investors tend to look for in defensive assets, which is a key reason why they have typically preferred to stick to cash and bonds for the defensive component of their portfolios.

 

Interestingly, our survey data suggested that the lack of yield on gold, and its short-term volatility were not barriers to entry for potential gold investors, as only 7% of survey respondents quoted these factors as the major reason why they don’t invest in gold.

 

Of course, our position will always be that independent investors need to be well informed so that they can critically assess recommendations from financial advisors. If the recent news headlines haven’t convinced investors of that, we don’t know what will.

 

Surely another part of the reason that gold has been sidelined as investment class in Australia stems from the incredible rise in the value of Australian property over the past twenty-five years, with many Australians doing very well leveraging into residential property over this time period. Had the Australian property market had a crash like the US property market had, and if interest rates had been cut to zero locally, like they have been in the US, Europe and Japan, then we would expect gold demand to be higher in Australia.

 

Indeed the rising risks in Australian housing today are one reason we do expect gold demand, and gold prices to rise in Australia, as we covered in this detailed report titled "Australian Housing - End of the Boom?"
 

Regardless of why some Australians “never thought about it” when it comes to gold, the real issue for Australians is a basic lack of understanding of one of the most universally-accepted components of financial strategy: diversification. Here’s what the ASX report uncovered about diversification:
 

ABC Survey Diversification

 

The point is not that gold should supplant housing or shares, but that gold should complement other investments. It simply has too much to offer as an inflation hedge, safe-haven investment and historical store of wealth to be sidelined in the investment conversation.

 

Tellingly, nearly 20% of survey respondents suggested that it either seemed hard to buy and sell gold, or that they didn’t know how to invest in gold. At ABC Bullion, we offer 24/7 online trading and products like the ABC Bullion Gold Saver, which allow investment into gold and silver from as little as AUD $50 per month. Though it may be a little cumbersome to sign up, as it is to create a new bank account, we think the rewards are clearly worth the effort.