Gold and cryptocurrency are two vastly different assets: the former is seen as a safe-haven asset, with its value often rising when other investments fall, while the latter exhibits high volatility but has seen significant growth.
The purposes of these two investments may differ, but many individual investors are now turning to both gold and cryptocurrency to diversify their portfolios and hedge against inflation.
According to a recent survey by brokerage firm eToro, 58% of retail investors have recently increased their investments in gold and cryptocurrency, or are planning to do so in the near future. The survey collected responses from 10,000 independent investors from 12 countries/regions, including 1,000 respondents from the United States, and the respondents were not limited to eToro clients.
Meanwhile, the prices of gold (GC00) and Bitcoin (BTCUSD) have both hit historic highs.
Although simultaneously investing in both these assets may not be common, they do share some similarities. Both can be used for diversification purposes, moving away from a sole focus on stocks, and both can help combat inflation.
Bret Kenwell, a US investment analyst at eToro, told MarketWatch, “Gold is a safe-haven asset, a secure asset, while Bitcoin is a risk asset. But if you combine the two, you might find that they both serve well in combating inflation. If you’re concerned that inflation will erode your assets, then both these assets are worth considering.”
The survey revealed that 28% of US investors identified inflation as the biggest threat to their investment portfolios, the most frequently mentioned threat. Despite a slight cooling off in inflation since its peak in 2022, new tariffs could drive up prices, leading to inflationary pressures.
Kenwell noted that while Bitcoin was once dubbed as “digital gold,” this term has gradually faded over the years. He pointed out that the trading mechanisms for gold and Bitcoin are starkly different but can be combined when attempting to resist inflation. He also added that gold can protect an investment portfolio through hedging when other assets decline, while cryptocurrency can generate profits through growth.
The survey showed that younger investors are more likely to have invested in cryptocurrency, with 54% of Gen Z investors and 62% of millennials holding cryptocurrency assets in their portfolios; interestingly, the same holds true for gold.
Kenwell said, “It’s not surprising that younger investors are more enthusiastic about cryptocurrency than older investors, but what surprises me is that they are also investing in gold.” He added, “I certainly expected the ‘Baby Boomer’ and ‘Silent Generation’ to have more exposure to and willingness to invest in gold, but millennials and Gen Z are demonstrating stronger performance in this aspect.”
Kenwell remarked that younger investors are showing a stronger interest in gold than before. However, he highlighted that with the recent surge in gold prices reaching new highs, with three of the past five years seeing gold outperforming the S&P 500 index, this recent stellar performance may be driving younger investors to invest in gold.
Kenwell stated that looking at gold’s recent performance, investors may believe they can use it to outperform the market.