Investors Turn Towards Precious Metals As Inflation Triggers Uncertainty

The level of inflation in the US reached a 40-year high before the Federal Reserve intervened with interest rate hikes. The concerns about inflation and financial stability have prompted investors in the US to seek alternative assets to diversify their portfolios. These investors are now turning towards precious metals as an alternative to traditional assets.

Investors turn towards precious metals amid uncertainty

A recent study by Retirement Living showed that millennials were seeking new ways of investing and saving amid skepticism about the current state of the economy. Precious metals have drawn much interest as they are usually seen as a hedge against inflation. The study showed that online searches for “how to invest in gold and silver” had jumped by 656% over the past year.

The search volume data is not the only metric showing a shift in investor sentiment. A survey involving 1,027 US investors found that 63% of investors were uncertain about traditional investments like bonds, cash, and stocks because of the soaring inflation. On the other hand, gold was seen as a trusted alternative.

The Senior Content Manager for Retirement Living, Jeff Smith, opined that the findings show that gold was a trusted asset during periods of high inflation. While gold remained the most trusted alternative asset, other assets such as collectibles, wine, and hedge funds were the least trusted alternative assets by Gen Z.

Investment habits also changed after the collapse of Silicon Valley Bank earlier this year. One in four respondents in the survey reported an increased interest in alternative assets after the collapse of SVB. A third of the investments made over the past six months were in alternative assets such as cryptocurrencies.

Gen Z investors were the least skeptical towards new traditional investments, with 30% of the investors in the group being more interested in alternative assets. On the other hand, 43% of millennials admitted to investing in alternative assets over the past six months.

Following these results, Smith said that the behavior of Gen Z investors “might be motivated by fear of not having enough to survive given the current cost of living in certain areas, the desire to buy or finance a first home, or a cultural push toward earlier retirement.”

Rising inflation attributed to changing investment habits

The level of inflation has increased significantly across the US and other countries, resulting in financial stress. The fear of inflation has led to US investors diversifying their investment and retirement accounts. The shift in investment tactics can also be evidenced by the growing interest in cryptocurrencies and precious metals.

The investors that were involved in the survey said that alternative investments included more tangible assets compared to traditional investors. These investments were also being seen as a store of value, and a hedge against increasing prices because of inflation. Diversifying investment portfolios was also being used to hedge against the risks that came from uncertainty in the economy.