Millennials Buck Financial Advisors’ Advice, Seek Gold ETFs

As the oldest gold exchange-traded fund, the SPDR Gold Trust (GLD) approaches its 20-year anniversary, the market for ETFs that invest in the precious metal appears to have bifurcated: Millennials like it, while many financial advisors won’t permit clients near it. 

“We do not recommend gold ETFs, individual stocks (miners) or direct investments into the metal,” Jason Ware, chief investment officer and chief economist at Albion Financial Group in Salt Lake City, told etf.com in an email. “The reason is simple: Gold is speculation. There are no revenues, earnings, cash flows, nor products and services to appraise and value.” 

If an investor wants an inflation hedge, he recommends Treasury inflation-protected Securities, real estate or the stocks of companies with pricing power as well as diversified stocks in general, like the S&P 500. 

There are 35 gold ETFs traded in U.S. commodities and equities that have a total of $115.21 billion in assets under management and an average expense ratio of 0.61%, according to etf.com data. GLD is the largest, with $57 million in AUM, according to State Street Global Advisors, which manages the ETF. The MicroSectors Gold -3X Inverse Leveraged ETN (DULL) is the newest to launch. 

A recent study on gold and gold ETFs by State Street showed that investment in the metal is higher among millennials than among Gen Xers and boomers. It also found that, while 80% of all investors believe gold will always have monetary value, only 41% said they understand what influences its price.  

Among those who invest in gold, more than half said they were likely to increase their investment in it over the next six to 12 months. The survey estimates that 20% of U.S. investors have gold in their portfolios and, among those, the average gold allocation is 14% of portfolio assets—with nearly half (47%) of them holding gold ETFs.  

None of those findings will influence Jacksonville, Fla., financial advisor Joey Loss, who echoed Ware’s sentiments. “The idea that gold is the everlasting hedge against inflation is overblown and speculative at best,” said the founder of Flow Financial. 

Financial advisor Amir Noor with United Financial Planning Group in New York City does favor gold ETFs, saying they allow him to offer clients exposure to the precious metal. 

Follow Michelle Lodge on Twitter @lodgemich