Why do a quarter of the US population consider gold to be the best investment? [An experts insight]

In the spring, Gallup conducted a survey among Americans to find out which asset class is considered the best long-term investment. Gold rose to second place after real estate, outperforming stocks, bonds and deposits.

In 2022, 15 percent of Americans thought gold was the best long-term investment, this year is has risen to 26 percent. With this, gold overtook stocks.

Real estate has been in first place in the survey since 2013. In the last survey, as many as 35 percent of respondents considered it the best long-term investment. It is true that last year the corresponding indicator was 45 percent, so there has been a sharp decline.

Stocks were third at 18 percent, followed by deposits (13 percent) and bonds (7 percent). If cryptocurrencies are included, they received 4 percent of the votes.

Which asset class do you consider to be the best long-term investment? Real estate in green, gold in dark blue, stocks in light blue, deposits in red and bonds in navy blue. Percentage of respondents. Source: Gallup.

Louise Street, an analyst at the World Gold Council, said that while higher interest rates have reduced the appeal of real estate, the same cannot be said for gold.

“In one year, the number of people who consider gold to be the best long-term investment doubled. This is despite the fact that interest rates rose to a 16-year high in March,” Street said.

The Gallup poll also aligns with gold demand data. The physical demand for gold rose to the highest level in the last 11 years last year, which was mainly helped by central bank purchases and investment demand.

Demand for gold bars and coins grew by 2 percent in 2022, the year before that demand was also very strong. A total of 1,217 tons of investment gold were bought last year. The demand was around 340 tons for two quarters in a row, the last time this happened in 2013.

Demand from United States and European investors has been particularly strong – last year a total of 427 tons of investment gold were bought. This surpassed the 2011 record of 416 tons.

The Street speculated that while institutional investors have sold gold due to higher interest rates, inflationary pressures hitting US consumers could be the main driver of demand as people look for a hedge against inflation:

The Gallup poll shows that the popularity of deposits as a long-term investment increased minimally – despite deposit interest rates approaching 5 percent. But compared to inflation, this interest remains poor, and those who expect long-term inflation see gold as a more attractive investment. Our research shows that gold investors are very aware of gold’s potential as a hedge against inflation.

A survey by the World Gold Council shows that Americans “understand gold’s role as a long-term store of value and are aware of its security.” It was also revealed that two-thirds of investors agree that “gold is a good insurance in politically and economically uncertain times” and that its value increases over time.

Tavex analyst Mait Kraun’s comment:

Gold has obviously gained a lot of popularity among investors over the past year. On the one hand, there are several reasons, such as geopolitical tensions (especially the war in Ukraine), high inflation, and uncertainty about the world economy after the corona crisis. On the other hand, the connection with the price movements of various assets can also be seen. The price of gold has remained high in recent years and this also reflects the general psychology of investors, where assets that have shown good returns in the recent past are valued better. We can see that in 2011, gold was the first in the survey with 34 percent, in the same year there was also a price peak in dollars, which took nearly 9 years to reach again. However, the current trend is likely to continue in the future, as the fundamental picture is strongly in favour of gold.

The allure of gold, a standout among precious metals, as a premier long-term investment among Americans has notably increased, with a quarter of the US population now viewing it favourably. This surge in gold prices can be attributed to multiple factors, including rising inflationary pressures, political uncertainties like the situation in Ukraine, and global economic unease post the coronavirus pandemic.

Moreover, with fluctuations in the stock market, gold’s resilience in price over recent years appeals as a stable investment strategy, with memories of its high returns in 2011 still fresh in many investors’ minds. While some active managers may choose to buy and sell assets frequently, those looking to buy shares or gold bars see gold as a reliable choice.

The decline in the appeal of other types of investments, especially real estate, due to soaring interest rates, has further bolstered gold’s position. Furthermore, considering potential capital gains tax implications, many are evaluating their options carefully. As global uncertainties persist and the price of gold remains robust, its role as both a hedge against inflation and a stable store of value is likely to remain attractive for many in the coming 20 years.