Too much talk about generations in finance is flip and vacuous, to the level of declarations that the greatest generation stormed the beaches of Normandy, the boomers grew their hair long and unkempt, and the kids today can’t pull themselves away from their screens.
In what follows, we will avoid flippancy and approach in an analytical spirit the question of how the distinct generations in American life over recent decades have adopted different attitudes toward their investments and especially (although not uniquely) different attitudes about precious metals.
Generations Defined
Discussion is advanced by a definite terminology, even if it has to be a bit arbitrary.
- Baby boomers were born between 1946 and 1964. This means that the oldest of them began retiring around 2011, and the youngest will reach the traditional retirement age in 2029.
- Boomers, early or late, want the money they saved through their working lives to last at least as long as they do, with perhaps something left over for their heirs.
- The members of Gen X were born between 1965 and 1980. The youngest of them have a lot of time left in the working world.
- By now, even the very youngest of them, have set some savings aside for retirement and may be looking for good ideas as to how to make that nest egg grow.
- Millennials, who were born between 1981 and 1996, are in their younger working years.
- Most of the millennials who do invest are still in an early exploratory stage of their own experience.
With those demographics in mind, we’re going to focus on what each generation thinks about precious metals. Are there differences in attitudes across these groups, and are those differences value drivers?
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Our conclusions, in brief, are as follows:
- Boomers still have a comfort zone in which equity, debt, and realty dominate portfolios. To them, precious metals are largely a niche asset.
- Gen X is less set in its ways than boomers, but its members do retain a certain hesitancy about gold as an investment.
- Millennials have a broader comfort zone than older investors. A greater attraction toward precious metals as an asset class is a part of that.
How Baby Boomers Became Bullish on Stocks
Even the oldest baby boomers weren’t born until years after President Franklin Roosevelt broke the strong tie between the U.S. dollar and the value of gold. They were born under the Bretton Woods system (which entailed a weaker tie between the two), but they were still in their 20s when President Richard Nixon broke that tie, too.
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The value of the dollar has “floated” freely (usually sinking) vis-a-vis the value of gold ever since.
Meanwhile, the stock market was largely stagnant through the 1970s. This stagnation coincided with rampant inflation. The combination held until 1982, by which time Paul Volcker at the Federal Reserve had administered the tough medicine necessary to wring inflation out of the system.
Volcker thus had set the stage for a boom in the value of U.S. equities that began in 1982 and continued for the remainder of the century, with an aggregate move of 1,100%.
Boomers fell in love with stocks during this long period. This became part of something broader: equity was part of a comfort zone of the sensible investments, along with bonds — sovereign and corporate — as well as real estate — not limited to but including a boomer’s own home, which was the single most important investment for many families.
Many have, of course, made investments outside of that zone, in part because the boomers have never forgotten that they witnessed the persistent inflationary spirals of the 1970s in their youth. Some have looked to precious metals as a hedge against a recurrence of that pestilence.
Gen X and Millennials
Gen X members have lived past the exploratory investing stage in which the millennials remain. But they are not as settled into their ways as many of the boomers are.
There can, indeed, be an air of impatience to Gen X investing. In these uncertain times, they have little confidence that the time they have left until retirement will be “enough.”
Yet for all that, Gen X retains a certain hesitancy about precious metals as an investment. They may have inherited this hesitancy, or they may have picked it up in the 1990s when investments in the three traditional portfolio components did very well.
A 2020 survey asked adult Americans of a wide range of ages whether they own precious metals in the form of bars or coins and, if so, which metal(s).
The results show that 10.8% of Americans own gold, while 11.6% own silver. Those are overlapping sets, and the percentage of Americans who own one or the other is 16%.
Women were more likely than men to say that they own neither, and Gen X was more likely to say this than millennials. The percentage of Gen X women who said that they own neither gold nor silver was very high at 89%.
Confidence in the Choice of Metal
Let’s look more specifically at the older half of the millennial bracket, those born in the period 1985–95. We find that those who were invested in at least one of these metals were likely to be particular. A healthy 5.1% of the men in that group said that they owned only gold, not silver. This was the highest percentage of any demographic to select the “only gold” option. Meanwhile, 5.6% of the women in the same age cohort said they owned silver but no gold.
Therefore, millennials are both more likely than their elders in Gen X to say that they own one or the other, and more likely to own only one, suggesting that they are comfortable enough with the category to be particular in their choices.
We can offer some broad hypotheses about the significance of these numbers in terms of the recent economic history of the United States. Typical members of Gen X became responsible for earning their own income, paying off their student loans, etc. in the 1990s. This was a time of boom when the internet was bringing a new level of efficiency and productivity to the economy.
Attitudes Toward Wealth and Toward Crashes
Members of Gen X — in this respect, they are akin to the boomers before them — came to expect that a traditional portfolio, with equities, bonds, and perhaps some real estate, will stand one in good stead for the future. Indeed, ownership of a family’s principal residence is 12% of the investment portfolio of this generation. Outside of these familiar investments, many Gen X’s see gold and silver as chancy commodities, useful niche investments at best.
Millennials, on the other hand, have attitudes toward wealth informed by the dot-com collapse at the turn of the millennium and the attacks on New York and Washington on September 11, 2001. Some became adults concurrently with the global financial crisis of 2008, a meltdown of traditional financial structures.
The older generations, the boomers and Gen X, drew one lesson from that meltdown. But the younger generations, the millennials and their successors, Gen Z, have drawn another. Older folks have often reasoned that the best thing to do after a crash is to hold on to one’s assets and await the recovery. Equities come back; another hill follows every valley in the stock charts, they remind us.
A Broader Comfort Zone
Millennials, on the other hand, have never acquired the expectation that a traditional portfolio will do the job they need done in order to feel secure in their retirement, so that absent expectation leaves them with no reluctance to look elsewhere.
The turmoil at the end of the first decade of this century made them more likely to add metals to their portfolios and, over time, may make them more confident in being picky about which metals they buy. This accounts for the many “only gold” or “only silver” responses in the above-mentioned survey.
The same generational shift also manifests itself in a greater comfort level regarding cryptocurrencies. Although the two asset classes seem antithetical (crypto assets, of course, have no physical existence, while precious metals are the ultimate in the tangible), they are both outside of the once-fashionable portfolio mix of stocks, bonds, and real estate. And they are both becoming more acceptable to new investors as they get, well…newer.
Less Trusting of Advisers
Another related point is that millennials are less trusting of professional financial advisers than their baby-boomer or Gen X elders. In a survey by Accenture, they appeared four times more likely than boomers to say that they would not act on the suggestion of a financial adviser without doing their own independent research.
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