‘When all else fails, gold doesn’t’: Younger investors drive precious metal mania

2 months ago 15

Gen Z and Millennials chasing safer investments and better returns are among those lusting for gold, and increasingly silver, as global instability pushes up prices for the precious metals and boosts mining companies’ profits.

Despite a plunge on Monday, in which the spot price for gold fell as much as 5 per cent to $US4330.79 an ounce and silver slumped 11 per cent to about $US71 an ounce as traders locked in profits for the year, prices for the metals remain just below their respective record highs of $US4549.71 and $US84 reached in recent days.

Gold and silver have soared this year. The spot price of gold was at $US3290 at the end of July, while two years ago, it was trading below $US2000. Its strong growth is a sign of its continued appeal to investors who see it as a safe haven during a period of geopolitical instability. Meanwhile, the price of silver has more than doubled this calendar year.

While much of the increased demand for gold has come from central banks around the world bolstering their holdings, retail investors are also flocking to metals in droves as interest rates and inflationary pressures diminish the appeal in keeping money in financial institutions.

Jordan Eliseo, general manager of ABC Bullion Australia, said customer turnout was so high this week that queues were still spilling out of its flagship trading premise in Sydney’s Martin Place, though not quite at levels seen in October, when gold soared above $US4000 for the first time.

‘This year has been when precious metals have gone mainstream.’

ABC Bullion Australia’s GM Jordan Eliseo

Five-gram, 10-gram and 1-ounce bars of gold and ten-ounce and 1-kilogram bars of silver are among the most popular choices for customers, he said.

However, the store queues are “dwarfed” by the numbers of punters buying gold, silver and precious products online in form of ABC Bullion’s bars or exchange-traded funds (ETFs) tracking gold producers, he said. This includes offerings from ABC Bullion, as well as the flourishing of gold ETFs.

Eliseo said that while gold and silver prices had corrected their “over-exuberance” from October, “we’ve been very firmly back in bull market mode” over the past six weeks.

“This year has been when precious metals have gone mainstream,” he said. “It’s permeated the public consciousness – people are thinking about it, they’re talking about it around the barbeque.”

People queue outside the ABC Bullion store at Martin Place in October.

While interest in the precious metals spreads across all ages, Eliseo sees two notable groups of buyers.

“Certainly in the last year [...] we’ve seen a noticeable shift to younger investors,” he said. A decade ago, roughly 70 per cent of ABC Bullion’s clients were 50 and older. Now more than half are between 20 and 40 years old, he finds.

“If you think of a 40-year-old, over the last 20 years – effectively their entire adult life – they’ve seen precious metals outperform stocks, property and traditional assets.”

The other major investor demographic are people purchasing gold for their self-managed super funds to safeguard their retirement savings. “In many cases, they’re pre-retirees who have a pretty strong focus on preserving the wealth they’ve built up,” Eliseo said.

“If you look at interest rates and inflation, you don’t really make much in real terms by leaving your money in the bank, and that drives more people towards precious metals,” Eliseo said.

Tania Constable, head of the Minerals Council, said geopolitical instability has also played a significant role.

Wars in Europe and the Middle East, US President Donald Trump’s volatile administration, tensions with China and oil-producing Venezuela, and military strikes against the Islamic State in Nigeria are contributing to a sense of uncertainty and boosting the appeal of safe haven assets.

“When we see geopolitical issues within the world, when we see financial instability, when there’s a lot of policy uncertainty, the market tends to return to gold. So it really is one of those commodities that is always a sound investment,” Constable said.

“When all else fails, when other hedges fail, gold doesn’t.”

With demand booming, the mining industry is gearing up to respond. New mines take time to build, but miners are exploring potential expansions “as fast as they can”, Constable said.

“There is new interest in NSW, in Queensland, in Western Australia – just about every state is doing a lot in terms of exploring for gold right at this stage,” she said.

The yellow metal is on track to become Australia’s second most valuable export commodity behind iron ore, overtaking liquefied natural gas.

Revenues from bullion will jump to $60 billion in 2025-26 — the 12-month period to next June — up from $47 billion in the prior year, and almost double the total two years ago, the Department of Industry, Science and Resources said in a report this year.

“In terms of revenue and wealth for Australians, gold is certainly doing some heavy lifting at the moment,” Constable said. “It’s a huge gain for the country.”

With prices rising and rising, is gold going to hit $US5000 an ounce in 2026?

“Half the industry is saying yes and half is sceptical, but anything’s possible over the next little while,” Constable said.