Thirty-eight percent of U.S. high-net-worth investors hold gold in their portfolios, up from 20% in 2023, according to State Street Global Advisors’ 2024 Gold ETF Impact Study, released Nov. 18 to mark the 20th anniversary of SPDR Gold Shares, the first U.S.-traded gold ETF.
The study, which compared data collected in July and August of this year with data collected in March and April of 2023, also found that 40% of high-net-worth gold investors surveyed—those defined as having at least $250,000 in investible assets — began investing in the precious metal within the past five years.
Among high-net-worth gold ETF investors surveyed, 84% said that their investment has improved the overall performance of their portfolios, up from 73% in 2023, the study found.
“I think a lot more people have become profoundly aware of the protective attributes that gold offers,” George Milling-Stanley, chief gold strategist at SSGA, told Pensions & Investments, adding that gold “offers you good diversification (because) it doesn’t correlate closely with anything else in the typical portfolio.”
Gold offers “protection against sustained high inflation, no question,” as well as protection against potential equity market and currency weakness “whether your currency is the U.S. dollar, or the Indian rupee or the Chinese renminbi,” Milling-Stanley said.
“So, all those things I think are very, very important,” he said, adding that, in addition to those factors, the significant performance gold has offered in 2024 with the price up 33% year to date, “is a very, very powerful argument in favor of gold.”
SPDR Gold Shares, known by the ticker symbol GLD, is the world’s largest gold ETF “by a huge margin,” Milling-Stanley said. GLD, which listed on Nov. 18, 2004, and currently has $71.9 billion in assets, was also the first U.S.-listed ETF backed by a physical asset, according to SSGA’s website.
“First mover advantage helps,” the strategist said of GLD’s market dominance, noting that Barclays Global Investors, which BlackRock subsequently acquired, brought a gold ETF to market in January of 2005.
By that time, “we had basically cornered the institutional market, we’d cornered the hedge fund market,” Milling-Stanley said, adding that GLD by that stage already had billions of dollars in assets.
“And you know, they’ve been playing catch-up ever since,” he said.
BlackRock’s iShares Gold Trust, known by the ticker symbol IAU, had $32.2 billion in assets as of Nov. 15, according to BlackRock’s website.
Institutional appetite
GLD can be found among the holdings of institutional investors, filings with the Securities and Exchange Commission show. Arizona PSPRS Trust and the Teacher Retirement System of Texas for the quarter ended Sept. 30 each reflected shares of the ETF among their holdings, separate 13F filings show.
“Many pension funds around the world, including Teacher Retirement System of Texas, cannot own physical gold,” said Shayne McGuire, portfolio manager for the Emerging Markets Fund and the Gold Fund at the $203.7 billion Teacher Retirement System of Texas, Austin.
"Considering the complexities involved in owning the precious metal via futures, mining stocks, or other vehicles, GLD revolutionized gold ownership by giving the metal a ticker,” McGuire said. “Prior to exchange-traded gold, it would have been difficult to launch the Gold Fund we have been managing since 2009.”
Pension funds “have long-term liabilities and an investment that comes into its own in the long term makes perfect sense for them,” Milling-Stanley said.
Cavatoni added that “when risk moments happen, that’s when institutions realize ‘Oh wow, this is actually the kind of diversification I want,’” he said, citing a World Gold Council chart showing how gold has performed well during a variety of “drawdown moments” including the global financial crisis.
When the World Gold Council talk to pensions, foundations and endowments, “they basically fixate on that chart,” Cavatoni said.
‘Democratized’ access
The SPDR Gold Trust issues SPDR Gold Shares, according to the ETF’s prospectus. The trust’s sponsor is a wholly owned subsidiary of the World Gold Council, a not-for-profit association, the prospectus said.
Prior to GLD’s listing, a gold ETF already had been listed in Australia and another one had been listed in London, said Joseph Cavatoni, senior market strategist, Americas, at the World Gold Council, adding that both of those earlier products were done with support from the World Gold Council.
“What’s important is that everything up till GLD were fledgling markets for this type of investment solution,” said Cavatoni. The U.S. “was the market where ETFs were going to grow,” he said.
The move to launch GLD in the U.S. market was “a stroke of genius” because it “democratized the access” to gold, Cavatoni said.
Gold coins, gold bars
Prior to the launch of GLD and other gold ETFs, “you bought gold coins — you could buy them from the mint, or you can buy them from a coin dealer — or you bought gold bars, that was the principal thing,” Milling-Stanley said.
“There were a number of people who invested in gold mining company stock on the basis that they hoped that would be a good proxy for the gold price,” he said. “It wasn’t, because there’s an awful lot of other things that determine the stock price performance of any company.”
Milling-Stanley was actually working at the World Gold Council in the early 2000s when it did market research on why people didn’t invest in gold.
“People overwhelmingly … came back and said, it’s costly, it’s complicated, I don’t know why I need gold,” he said, adding that the World Gold Council told its consultants to go back to those people and ask what a gold product would need to look like for them to invest in it.
“Again, they came back overwhelmingly: It would have to be as close a proxy for the spot price of gold as possible, it would have to be 100% secure and it would have to be traded on a regulated stock exchange,” Milling-Stanley said.
The stipulation that it trade on a regulated stock exchange made his team realize that “we needed an ETF,” he said.
“So that was when we reached out to the State Street folks,” Milling-Stanley said, noting that SSGA had launched the first U.S.-listed ETF, the SPDR S&P 500 ETF Trust, known by the ticker symbol SPY, in 1993.
“And only 10 years later is when we were looking at doing a gold ETF,” he said. “And they were extremely helpful and that’s probably why they wound up as the marketing agent.”
The SSGA study included data collected in July and August of this year from 1,502 high-net-worth investors; 1,500 emerging affluent investors with $49,000 to $249,000 in investible assets and 299 financial advisers with at least $50 million in assets under management. SSGA, the asset management business of State Street Corp., had $4.73 trillion in assets under management as of Sept. 30, according to its website.
