The World Gold Council hit back at the high-profile Drop Gold campaign, arguing investors see crypto as risky and speculative. But do the figures support that assertion?
The council released the results of a survey of 18,000 people in India, China, the U.S., Germany, Canada, and Russia designed to provide “valuable insights into what, how, why and where people buy gold… [in] the wider context of retail investment and luxury goods in general.”
The research found that almost half of interviewed retail investors had bought gold at some point in their lives.
Courtesy World Gold Council, Retail investment assets by percentage
More than half of investors trusted gold more than “currencies of countries.” Trust in gold was strongest in India at 75 percent.
Courtesy World Gold Council, Why retail investors trust gold
Over 60 percent of investors trusted gold for its store of value properties. Almost half of the respondents said they would buy gold as an investment in the future. However, that number drops to 34 percent among those aged 18-38. The council concluded that the demographic differential merely shows that younger generations are “less risk-averse and less likely to adopt a long-term approach to investing.”
The council emphasized that 18 to 24-year-olds took a short-term approach to investing. According to the report, they were more likely to say “I don’t really believe in investing for the long term, I want to live for today.”
Highlighting the loyalty of gold investors, the industry’s market development organization found that around 60 percent of investors who had bought gold in the past would do so again. That figure contrasted with findings for cryptocurrencies, stocks, and funds — all at around 40 percent.
Courtesy World Gold Council, Loyalty to gold and other investment classes
Gold vs. Crypto
The World Gold Council is an industry advocacy organization. It has an interest in promoting gold’s value as an investment. Similarly, Grayscale Investments is a “trusted authority on digital currency investing” and has an interest in promoting Bitcoin, as well as the broader crypto market.
Grayscale initiated the Drop Gold campaign in May. The fund manager’s television commercial opens with two provocative questions, “Why did you invest in gold? Are you living in the past?”
The World Gold Council’s study was intended as a response to Grayscale’s Drop Gold campaign. In its full report, the council dismissed cryptocurrencies as a speculative vehicle for the youngest of investors — Gen Z, which the council defines as 18 to 22-year-olds.
“Gen Z’s live-for-today, risk-taking attitude is most evident in their exposure to other investments, rather than in the exclusion of gold, and one asset stands out as featuring more highly in their portfolios than those of older investors: cryptocurrencies. The role cryptocurrencies plays in their portfolio is significantly skewed towards short-term and speculative needs, in contrast to gold which is skewed towards long-term and wealth preservation needs,” the council writes.
A Fair Reflection?
However, the council’s own findings suggest otherwise. Their survey found only 22 percent of Gen Z respondents saw cryptocurrencies as a way to make short-term returns. A mere quarter considered crypto as speculative and high risk. The figures contrast sharply with the characterization of Gen Z’s cryptocurrency investments as “significantly skewed towards short-term and speculative needs.”
Grayscale’s Q3 inflows represented a quarter-over-quarter tripling of interest in managed crypto assets. 84 percent of those inflows came from institutional investors, primarily hedge funds. The June 2018 ING International Survey in Europe, the U.S., and Australia found that well over half of the 15,000 respondents had heard of cryptocurrency. Crypto awareness was highest in Austria at 79 percent and lowest in Belgium at 38 percent.
While the study found that only one in ten respondents had ever owned crypto, roughly a third saw Bitcoin as “the future of investment.” ING’s results also suggest cryptocurrency awareness spanned all generations, finding that “younger age brackets − especially people aged 25-34 or 35-44 − are not much more likely to agree they have heard of cryptocurrency than other age groups.” 60 percent of people aged over 65 had heard of cryptocurrency.
The online Harris Poll, conducted on behalf of Blockchain Capital in April this year, found that “Bitcoin awareness, familiarity, perception, conviction, propensity to purchase and ownership all increased/improved significantly” among Americans since October 2017.
Propensity to own peaked among younger respondents at 42 percent. But it grew among all age groups despite the bearish conditions of the market that preceded the poll. The most telling finding was that more people in every age group were open to the idea of owning Bitcoin than in the bull market conditions of October 2017.
Courtesy Blockchain Capital Blog, Bitcoin is a Demographic Mega-Trend: Data Analysis
Overall, younger generations are more interested in investing in cryptocurrencies than older generations. But the same is true for most risk-on asset classes. Capital growth has always been more important in an investment portfolio for younger investors, whereas capital preservation is the primary aim for older generations.
The World Gold Council characterized digital gold as risky and speculative. It also described younger investors as being more prepared to take investment risks. But even its own findings fail to support the link between risky investment attitudes and cryptocurrency. At the perceptual level at least, younger generations do not consider crypto assets to be speculative, short-term, or risky.
Cryptocurrencies are favored by a higher percentage of younger investors than older. But as awareness among all age groups and institutional interest both continue to grow — and as young investors age — that imbalance is likely to change.