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Most Australians Don’t Own Gold Bullion

09 July 2018

ABC Survey Question 3
We asked Australians if they held physical gold in their investment portfolios. A staggering 86% said “no”. That’s a shame, because gold investors have enjoyed outstanding returns since the turn of the century, with the yellow metal rising from under AUD $500 to over AUD $1,700oz over the past 18 years.
 
The growth in the price of gold, which has outperformed most listed equity markets and even Australian property, has led to a huge uptick in physical gold demand, not only in Australia but indeed all around the developed world.
 
Despite this staggering growth in gold demand, most investors, including Australian investors, do not own gold bullion today. Diving further into the data, 92% of women don’t own bullion, which means at a broad level that women are still missing out on financial gains and greater financial independence by being underrepresented in critical asset classes.
 
We looked at the demographics across age groups as well and found that the rate of non-gold ownership (86%) is largely consistent from 18-24 year-olds up to 65+. We think this is evidence that the entire country has been distracted chasing supposedly stratospheric gains in cryptocurrencies, tech unicorns, housing and index funds. Meanwhile, gold continues to deliver steady, reliable gains, which is probably why of the 15% of Australians that did own some gold in their portfolio, nearly 6% of them had over 15% of their total portfolio invested in bullion. It seems that those who have seen the light in terms of gold tend to give it solid weighting.
 
Statistical studies looking at market return data over the last 45 years demonstrate that the average return on gold was over 20% in years where the ‘real’ cash rate was 2% or less*, as it is today. That return was, more or less, double what equity markets offered, and triple what bond market investors were able to earn. Page 8 of the ABC Bullion SMSF Trustee and Physical Bullion Report highlights this information in more detail. 
 
Gold is also a trusted and reliable hedge against higher inflation, and also tends to be the best performing liquid asset in environments when the stock market falls hardest. The most obvious example of this was back when the GFC hit, with the ASX falling by the better part of 50%, whilst the price of gold in Australian dollars soared, enhancing, not just protecting wealth.
All of these factors demonstrate why gold is a valuable investment for Australians to incorporate into their portfolio, and in the coming years, we expect the number of Australians who invest in gold to increase meaningfully.
 
The results of our research should serve as a wake-up call to investors. It’s so easy for any of us to be drawn into the hype around various investment classes. “Housing Boom!” “Stock Market Crash!” “Another Unicorn Is Born!” We’ve all seen similar headlines, but at the end of the day, there is no substitute for comparing a broad range of asset classes and diversifying your portfolio accordingly. Gold has been humanity’s trusted investment of choice for over six thousand years, because it retains its value as currency despite political regime changes and new technological innovations. During tumultuous times like these, any investor ignoring that heritage does so at their own risk and peril.

*J Eliseo, Gold for Australian Investors, 2016, p. 83.