Investors worldwide seem to have an unlimited appetite for investing in gold, but the recent stock market selloff drove more Millionaires towards equities.
Appetite for investing in gold was whetted again yesterday by a report hinting the Federal Reserve would take steps if necessary to stimulate the economy. The rebound brought gold futures back over $1,800 an ounce, reversing a slide from the all-time high of $1,917.90 reached on August 23rd.
Analysts warn that gold has become the latest asset class to form a bubble, but many investors believe the precious metal offers the best protection from inflation and weakening currencies. Demand for gold spikes in times of economic uncertainty, a phenomenon witnessed as gold prices peaked during the height of the European debt crisis.
Affluent Americans typically allocate about 10 percent of their assets to alternative products such as gold. Wealthy investors certainly participated in the extended gold rally, but many have cooled to the precious metal in recent months. Volatile financial markets in early August drove less than 4 percent of Millionaires to sell other investments to purchase gold, according to a Millionaire Corner survey conducted this month. These wealthy investors were much more likely to take advantage of the downturn by purchasing more stocks than investing in gold with more than 28 percent reporting they had purchased additional equities.
The move to equities reflects a confidence not as widely shared by Non-Millionaire investors. A greater percentage of investors with a net worth between $500,000 and $1 million were drawn to the safe haven of gold. Five percent sold other investments and were investing in gold, while fewer than 22 percent purchased additional stocks. Investors with less than $500,000 were the least likely to take any action during uncertain times.
Younger investors, who represent a group with a healthy appetite for investment risk, also took advantage of the recent downturn to increase their stock holdings. More than one-fourth of investors ages 40 and younger bought stocks in the last few weeks, while 3 percent sold some of their investments to purchase gold.
The group most prone to action, the cohort of senior corporate executives, was the most likely to add to their equity portfolios and to shore up their gold reserves. More than 32 percent bought stocks in the wake of the steep selloff in August, while 6.7 percent sold some of their investments to purchase gold.