Retail Market Survey: Gold is Good
December 26, 2019
by Patrick A. Heller
Last week, the World Gold Council released a different survey on the retail gold market. A total of 18,000 people were surveyed, 2,000 investors each in Canada, China, Germany, India, Russia, and the United States and 2,000 jewelry buyers each in China, India, and the U.S. The results were not that surprising to me but might confound others.
There were five key themes that came out of the survey:
- People are confident in gold and loyal to the metal.
- While people are confident in gold as a concept, those who have never purchased physical gold have trust issues about the purity of gold products and with some gold retailers.
- Attitudes toward gold were largely consistent among all age groups.
- Digital access to information about gold and to conduct online transactions lags behind that of other forms of investment.
- There is generally low awareness about gold among people who do not yet own any.
In total, 48 percent of people surveyed had already purchased some form of gold (investment bullion, jewelry or industrial purposes), 38 percent who had not already purchased gold would consider doing so and 13 percent would not consider purchasing gold at all.
For investment purposes, the Chinese were the most active buyers of gold. There, 72 percent already own gold, 24 percent would consider it in the future and a meager 4 percent would not purchase any gold. This strong interest is amazing considering that private ownership of gold for investment purposes in China was only pretty much legalized in 2006.
India came in as the second strongest gold market. In that country, 67 percent own gold, 29 percent would consider it in the future and only 4 percent would not buy any gold.
After them, Germany and the U.S. are significantly behind in gold ownership. In Germany, only 41 percent are owners, 36 percent potential owners, and 24 percent averse to gold. In America, only 38 percent are owners, 41 percent were potential owners, and 20 percent would not purchase gold.
Russia’s results were interesting, where 22 percent own gold, a whopping 57 percent are potential gold owners, and 20 percent would not buy gold. The sizeable potential interest probably reflects the political and economic uncertainty in that country.
I would have expected the results in Canada to be similar to the U.S., but they weren’t. Only 24 percent of Canadians already own gold, a moderate 42 percent would be potential owners and a sizeable 34 percent have no interest in owning gold.
In all, 65 percent of gold investors are confident that the metal will not lose its value in the long-term. For jewelry buyers, 72 percent consider gold to be a long-term store of value. Jewelry owners consider gold to be so valuable that they would pass it on to their heirs.
Of people who had purchased gold within the past 12 months, 44 percent purchased it as a way to cover changing risks, 29 percent bought it on the basis of receiving a recommendation and another 31 percent purchased because they considered the price to be low (some gave multiple reasons).
Those who purchased gold as a way to manage risk gave a variety of explanations of what that meant to them. Owning an asset that was of low risk was named by 19 percent of them. Another 18 percent wanted to reallocate away from what they considered to be higher-risk investments. A total of 17 percent purchased gold to explicitly diversify their investment portfolios.
When gold investors were asked why they owned gold, a plurality of 37 percent expect to realize a good return over the long-term, 30 percent perceive it as wealth protection, 18 percent foresee obtaining a good return over the short-term and 9 percent view it as a speculative high-risk investment with a potential for very high returns. There were a handful of other responses.
Among investors who already own gold, 64 percent say they would definitely purchase more in the future. That was far above the plans to purchase investment funds (40 percent), cryptocurrencies (40 percent) and individual stocks (39 percent).
Among gold investors, 61 percent said they trust gold more than they do fiat (paper) currencies. This was fairly consistent among all age groups, ranging from the trustworthiness of 56 percent for the 18-24 and 55-65 age groups up to 64 percent for those aged 35-44.
Among the misgivings cited by people who do not own gold but would consider doing so in the future, 28 percent of potential investors have concerns about buying counterfeits, 21 percent are worried about the purity of products and 14 percent have industry trustworthiness issues. There were lower levels of mistrust for potential jewelry buyers, where 19 percent were suspicious about the purity of gold products and 14 percent don’t trust the industry.
Among all investors, 40 percent cited convenience and ease of making gold purchases as a key requirement to do so.
Among those who have never purchased gold but might potentially do so in the future, the four most common reasons for not yet having made a purchase were lack of affordability (30 percent), lack of sufficient knowledge of how to buy it (28 percent), lack of understanding of what affects the price (22) and not knowing anyone else who has invested in gold (19 percent).
To gain access to the entire report, which would require disclosure of some personal information, go to www.retailinsights.gold/state-of-the-market.html