Gold has experienced a notable resurgence in investor interest since 2022, shifting from its previous status as a neglected asset to a strategic component in many portfolios. Both retail and institutional investors are increasingly viewing gold as a long-term investment, according to a recent survey of family offices.
The year 2024 has been particularly strong for gold, with the metal rising over 16% year-to-date, outperforming many major asset classes, as highlighted in the World Gold Council’s (WGC) mid-year outlook.
Louise Street, Senior Markets Analyst at the WGC, pointed out that gold has historically grown at about 8% annually in US dollar terms and has outperformed the MSCI World total return index over the past 25 years.
The Campden Wealth Family Office Gold survey, conducted in collaboration with the WGC, reveals that many family offices are incorporating gold into their portfolios. Adrian Murdoch, editorial director at Campden FB, noted that more than half of those holding gold view their allocation as strategic.
Oliver Wilhelm, Global Head of Advisory and Individual Solutions at SOLIT, confirmed this trend, emphasizing gold’s role as a hedge against inflation. “Gold tends to increase in value when fiat currencies lose purchasing power,” Wilhelm explained. He described gold as a form of insurance for investment portfolios, offering protection against unforeseen events and serving as a reliable asset for preserving wealth over the long term.
Wealthy families often use gold to safeguard their assets and to ensure wealth preservation across generations. Wilhelm highlighted that investing in gold helps diversify portfolios, protect wealth, and potentially generate returns in both stable and uncertain economic conditions.
However, the survey also revealed some resistance to gold, with critics citing its lack of income or cash flow as a significant drawback. Wilhelm addressed this critique, recalling Warren Buffett’s view that gold lacks yield and therefore has no potential for compounding wealth. He countered that while gold does not produce income, its price has appreciated significantly over the past 15 years, averaging around 9% annually.
Despite some skepticism, the outlook for gold remains positive. Murdoch cited recent reports, such as “Asia family offices pile into gold as hedge against market turmoil” from AsianInvestor, as evidence of growing interest in gold among family offices seeking to hedge against market uncertainties.
Additionally, the WGC’s June survey of North American asset owners identified gold’s role as a proven diversifier and changes in US dollar strength as key factors driving investment in the metal. The survey also highlighted gold’s limited production and inflation-hedging characteristics as positive attributes.
Looking forward, the WGC suggests that gold’s momentum could continue if falling rates in developed markets attract Western investment flows and if global investors maintain their focus on hedging against market and geopolitical risks.
In conclusion, while the absolute allocation to gold may be modest, it remains a crucial element in many family office portfolios, serving as a diversification and wealth preservation tool amid current market and geopolitical conditions.
