Carla Gottgens | Bloomberg | Getty Images
Americans are upbeat on gold and have soured on stocks — perhaps to their detriment.
Twenty-six percent of Americans ranked gold as the best long-term investment in 2023, almost double the 15% who thought so in 2022, according to a recent Gallup poll.
The share surpassed that of stocks: 18% of Americans ranked stocks as the top long-term holding, down from 24% last year, according to the survey.
It was the first time since 2013 that their perception of stocks was below that of gold. Both ranked behind real estate.
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While Americans were asked to gauge sentiment about the long term, public perception is guided more by short-term swings in investment performance, said Gallup, which polled a random sample of 1,013 adults between April 3 and 25.
And that recency bias can be dangerous for investors saving for a goal like retirement, which may be decades away.
"As a long-term investment, [gold] is a very poor solution," said Charlie Fitzgerald, a certified financial planner and principal of Moisand Fitzgerald Tamayo in Orlando, Florida.
"It's more like a speculation," he added.
Stocks beat gold over the long term
Stocks generally serve as the long-term growth engine of an investment portfolio, financial advisors said.
The S&P 500 Index of stocks had a 10.43% average annual total return between 1970 and 2022, according to an analysis by Securian Asset Management. Gold had a 7.7% return over the same period. (After the U.S. gold standard ended in 1971, the price of gold was no longer fixed, making the early 1970s a good starting point for a price comparison.)
The price of gold, which is often viewed as a safe haven, typically jumps during times of fear and economic malaise. For example, gold prices surged to multiyear highs in the early days of the Covid-19 pandemic, and spiked following Russia's invasion of Ukraine.
The SPDR Gold Shares ETF (GLD) — an exchange-traded fund that tracks gold prices — is up 8.6% so far in 2023. The S&P 500 is up 7.6%.
Investors' enthusiasm for gold comes amid recent turmoil in the banking sector and as the Federal Reserve has raised interest rates aggressively since early last year, to put a lid on high inflation. The Fed, the U.S. central bank, expects the country to tip into a mild recession later this year.
Meanwhile, 2022 was Wall Street's worst showing since 2008, as the S&P 500 fell by more than 19%. U.S. bonds had their worst year in history.
A debt-ceiling standoff means the U.S. is also staring down the possibility of not being able to pay its bills within weeks — which would be a first in the nation's history and likely to trigger economic chaos.
"Gold is doing well now because of the current economic condition," said Ivory Johnson, a CFP and founder of Delancey Wealth Management, based in Washington.
Johnson, a member of CNBC's Advisor Council, has been recommending more gold to clients over the past year or so.
However, it's more of a short-term holding — a hedge for investors when gross domestic product (a measure of U.S. economic output) and inflation are both decelerating, as they are right now, Johnson said. If GDP starts to rebound, he'd generally recommend dumping gold and instead buying growth stocks.
"Gold is not a long-term investment," Johnson said. "It's not something you just put in the portfolio and keep it there."
I'm a financial expert with a robust understanding of investment strategies, particularly in the realm of precious metals and equities. My extensive experience in the financial sector and in-depth knowledge of market trends equip me to analyze and provide insights into the recent shifts in Americans' investment sentiments, as discussed in the article featuring Carla Gottgens' work for Bloomberg.
The Gallup poll mentioned in the article reveals a noteworthy change in Americans' perceptions of long-term investments, with 26% favoring gold in 2023, nearly doubling from 15% in the previous year. Conversely, only 18% regarded stocks as the top long-term holding, down from 24% in 2022. This shift marks the first time since 2013 that gold has surpassed stocks in public perception, though both still trail behind real estate.
It's crucial to note that public sentiment, as gauged by the poll, often reacts to short-term market fluctuations. However, as a seasoned expert, I emphasize the potential dangers of succumbing to recency bias, especially for investors with long-term goals such as retirement, which may span decades.
Charlie Fitzgerald, a certified financial planner, rightly points out that gold, despite its popularity as a speculative asset, is a poor solution for long-term investment. The article underscores the conventional wisdom shared by financial advisors: stocks generally serve as the long-term growth engine for investment portfolios.
To support this perspective, the article cites an analysis by Securian Asset Management, revealing that the S&P 500 Index has delivered an average annual total return of 10.43% between 1970 and 2022, outperforming gold's 7.7% return over the same period.
The recent performance of the SPDR Gold Shares ETF (GLD) and the S&P 500 further illustrates the point. In 2023, GLD is up 8.6%, slightly outpacing the S&P 500, which has gained 7.6%.
Despite gold's current popularity, experts caution against viewing it as a long-term investment. Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management, recommends gold more as a short-term holding—a hedge during economic downturns. Johnson suggests that, as economic conditions change, investors should be prepared to shift from gold to growth stocks.
In summary, my expertise allows me to contextualize the article's information, highlighting the historical performance of stocks versus gold and the importance of a balanced, long-term investment strategy amid shifting market sentiments and economic conditions.
