The Scariest Gold Data Point I Have Seen

For anyone with even the most basic understanding of the contrarian nature of crowds in market psychology*, this data point should at least cause you to raise an eyebrow:

“Thirty-four percent of Americans say gold is the best long-term investment, more than say so about four other types of investments. Real estate (19%) and stocks (17%) are distant second choices.”

Now, in my opinion, the best thing gold has going for it is that the average man on the street does NOT own gold, does NOT know the price of gold, and is NOT bullish on gold – or so I thought.  This survey indicates otherwise.

HOWEVER, there are caveats.

First, “The Aug. 11-14 Gallup poll was conducted at the end of a tumultuous week on Wall Street that sent the price of gold soaring.”  That certainly affects sentiment, and may have skewed the results.

Second, the survey did not ask the question “do you currently own gold or have gold-related exposure as a part of your investment portfolio?”  That would have been more straightforward, and an even better indicator.  The survey did, however, ask if respondents had money invested in the stock market (59% said “yes”) – and the bullishness on gold was consistent amongst those who were stock owners (34% answered that they were most bullish on gold as a long term investment amongst both the entire national survey, and those who were stock owners).

Finally, this is just one survey of 1008 random people and there may be all sorts of sampling error.  That said, Gallup claims that the margin of error is +- 4%.

The full results of the survey are in the graphic embedded below, and I again find it surprising that the bullishness on gold translated across age groups, sex, income range, and political parties:

 

Now, for my personal channel checks:  I keep in touch with a few wealth managers, and I asked them the question “are you seeing an increase in your clients inquiring about gold and/or silver?”  One manager, who owns no precious metals for his clients, said that while he used to get one such call a week, he now gets about two such calls per week, but that they have not picked up dramatically in the last month.   The other manager, who does own gold for his clients,  said “generally, amongst wealthy people that I talk to, not a single one owns a single ounce of gold, aside from that which we have bought for them.”

 

-KD

disclosure:  I am long $PHYS and short $GLD – I have no exposure to the price of gold, only to PHYS’s premium to NAV.

* if you don’t understand why crowd sentiment is a contrarian indicator, think about this oversimplification:  when everyone is bullish, there’s no one left to turn bullish.

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