Gold remains mainstream choice among retail investors — WGC report

The slump in consumer demand was offset by extremely strong investment demand. Image source: JD Lasica via Flickr

The World Gold Council (WGC) on Tuesday launched a new consumer research report highlighting opportunities for gold for those working in both retail investment and jewellery markets.

Based on feedback from a survey of 18,000 people, the research looks at a range of markets including China, India, North America, Germany and Russia, and highlights insights into attitudes towards gold around the world: How and why people buy gold, and also their reasons for not buying.

The new WGC report states gold remains a mainstream investment choice, with 46% of global retail investors choosing gold products – the third most consistently bought investment behind saving accounts (78%) and life insurance (54%).

As for jewellery, the survey shows that consumers prefer gold jewellery versus jewellery made from other metals, with 56% of participants having bought fine gold jewellery compared to 34% for platinum jewellery.

“The retail gold market is healthy… but what really excites me is the untapped part of the market: those people who have never bought gold but are warm to the idea of doing so in the future”

David Tait, CEO, World Gold Council

The report states that more than a third (38%) of retail investors and fashion enthusiasts that have never bought gold in the past are warming up to the idea. This shows big potential – according to the WGC – for the gold market to grow if untapped sources of demand can be converted.

The WGC report finds more than two-thirds (67%) of all retail investors believe gold is a good safeguard against both inflation and currency fluctuations, and 61% trust gold more than fiat currencies.

However, the report also finds that there still exists areas of mistrust. While people have confidence in gold, there is some mistrust among those who have never bought gold in the past but are open to the idea of buying it in the future, with 48% and 28% of all potential investment and jewellery consumers, respectively, citing a lack of trust as a significant barrier. The WGC adds that this could be mistrust around fake or counterfeit bars and coins, product purity, or the trustworthiness of some retailers.

Another key finding is that gold can resonate more deeply among younger consumers. Millennials’ attitudes towards gold are not much different to those of older generations, but there are perceptual misgivings among the younger Gen Z audience, and these are particularly pronounced in China’s jewellery market. For example, 40% of fashion buyers aged 18 to 24 in China agree that gold can bring good luck, compared with 88% of those aged between 55 and 65.

The WGC also believes technological innovation can create a route to new audiences. While there are some pioneering, tech-savvy players in the gold market, the data suggests that there are too few.

According to the report, gold compares poorly to other retail investments and fashion items when looked at through the lens of digital distribution, marketing and communications. Numbers show that global retail investors only buy 9% of gold coins and 6% of jewellery online, compared with 25% of gold-backed ETFs.

Lastly, the WGC mentions that there are knowledge gaps in the minds of potential gold buyers that need to be filled. Two-thirds (66%) of potential gold consumers globally say they lack the necessary knowledge to buy gold. Greater awareness of gold needs to be created through TV, print and social media, they say. Quality education is required on the benefits of owning gold; and, while not a mainstream issue now, the next generation of potential gold investors need to know more about the industry’s ethical credentials.

“The retail gold market is healthy, with gold being considered a mainstream choice. But what really excites me is the untapped part of the market: those people who have never bought gold but are warm to the idea of doing so in the future,” says David Tait, CEO at the World Gold Council.

He adds that two issues need to be addressed to engage with these potential gold buyers: trust and awareness. “This market can flourish if we can build trust across the broad spectrum of gold products being sold and raise awareness around the positive role gold can play in protecting people’s wealth.”