WGC: Gold Insights into USA and Canada

Author: Jon Clarke - Bullion & Economics Editor

Published: 13 Nov 2020

Last Updated: 18 Nov 2020

Synopsis

The World Gold Council (WGC) took an in-depth look in to the investment behaviour in the US and Canada and found differences between the two although both showed that there were opportunities for growth in both markets for gold investment.

credit:wikicommons

Gold Demand In USA & Canada

Both countries show that savings accounts are still the preferred choice of investment for both Americans and Canadians, but a marked difference in the relationship to gold with 30% of Americans holding the yellow metal compared to only 18% of Canadians.

A lack of knowledge an understanding of gold’s nature means there is opportunity to educate investors. 59% of Americans and 54% of Canadians believe gold is just another commodity, although 63% of US investors see gold as an inflation safeguard in comparison to only 50% of Canadians.

Differences in attitudes are also reflected by the higher number of females investing compared to men, the majority of whom look for steady returns with a lower risk.

Risk Appetites in North America

The WGC split investors into 4 categories:

  • Adventurous Traders
  • Agile Strategists
  • Cautious Savers
  • Guided Risk Takers

Adventurous Traders – Short-term views, looking for immediate returns. Higher appetite for risk and willing to experiment. 38% of US investors are in this category and only 32% of Canadians.

Agile Strategists – Most engaged in investing. Confident, and willing to take risks but may still hold long-term vies. Usually, the first ones among peers to consider newer investment options. 26% of Canadians are classed as Agile Strategists compared to 24% of Americans.

Cautious Savers – Highly risk averse, these types of investors look for safer long-term investments and seek to minimize risk as much as possible. Canadians seem to be the most risk averse with 26% while Americans take up only 21% of the total.

Guided Risk Takers – The smallest proportion of investors are those looking for short-term high returns rather than long-term investments. They rely on others to help make decisions but are still willing to take risks. Americans and Canadians take up 18% and 16% of this category, respectively.

Growth Opportunities

The WGC suggest there is still opportunities for growth in gold demand, particularly among the adventurous and agile categories.

The main barriers to investment appear to be education and trust, with the main concerns that it is either not affordable or there are concerns about buying counterfeit gold and safe storage. To be able to drive future growth, the WGC suggests focusing on the segments closely aligned with their product offerings and individual strategy.

The desirability for long-term stable investments among women also shows opportunities for growth as the nearly half of women in Amarica and Canada would consider buying gold in the future.

18 to 24-year-olds seem the least likely to invest in the long-term but there seems to be an increase in those willing to invest in the future.

Adoption of the innovations in financial technology, although slow in North America, have been accelerated due to the impact of COVID-19. Much of the adoption has been invested in cryptocurrencies apart from gold-backed exchange-traded funds (ETFs) which have been bought mostly online.

Further Barriers

For some, gold is still considered complicated, particularly across the Cautious Saver category. Problems of where, how, what to buy, and who from, all crop up around many of the more risk-averse. Simplicity would be a key driver in future demand.

The increase in competition from Bitcoin and other cryptocurrencies has certainly had an effect, with a clear overlap in investor preference. The WGC suggests that this crossover shows a recognition in diversity of investment assets. Plus, gold ETF’s could possibly bridge a gap between crypto and gold holders.

Environmental concerns are still rising, which remains one of the highest concerns, particularly among those not considering gold investment. Even among those considering gold, 30% still have concerns pertaining to the ESG (environment, social, governance) impacts of precious metal production. The Responsible Gold Mining Principles (RGMPs), have attempted to address these concerns, launching a 2019 framework that focuses on responsible gold sourcing and requires members to adopt their 51 principles to help investors in understanding the process. 

Conclusions

The WGC’s research offers an in-depth view of the North American investment market, showing opportunities for growth in a number of areas across several demographic groups. A need for retailers and producers to inform and educate potential investors is evident, as is the need to cater to customers’ needs and extend their reach to new potential investors.

Further Reading

You might be interested in our precious metals and coin news articles.

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