Physical gold offers more protection than mining stocks, says State Street’s George Milling-Stanley

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Investors looking to weather a volatile market may want to opt for physical gold over gold stocks.

That’s according to George Milling-Stanley, one of the world’s experts in gold and the chief gold strategist at State Street Global Advisors.

“One of the reasons I own gold bar(s) is that I believe it offers me some protection against potential weakness in the equity market,” Milling-Stanley told CNBC’s “ETF Edge” this week. “When the equity market goes down, gold mining stocks remember that they’re equities, and they tend to go down with the general level of the equity market. So, they’re not offering me that extra level of protection.”

Milling-Stanley’s firm runs two exchange-traded funds that track the performance of the spot price of gold: the SPDR Gold Shares ETF (GLD) and SPDR Gold MiniShares Trust (GLDM).

They’re differentiated by their gross expense ratios — 0.40% for GLD and 0.10% for GLDM — and it’s this key distinction that also differentiates the type of investor they attract, according to Milling-Stanley.

“If you are someone who wants to trade … or if you want to be a tactical player — that means you need to be able to move very, very quickly — then GLD’s liquidity after 20 years now means that that has very, very low trading costs compared to any other gold ETF,” he said. “If you have a million dollars and you want to put a million dollars into gold and leave it out there, then GLDM with its lower expense ratio makes more sense for you.”

As of Thursday’s close, GLD and GLDM were both up 15% year to date.

Bullion, bitcoin and boomers

The notion that gold is a “fuddy-duddy” investment no longer rings true, according to Milling-Stanley. State Street’s 2023 Gold ETF Impact Study found that millennials had greater portions of their portfolios allocated in gold than older generations. 

The metal’s popularity among younger investors comes as bitcoin continues to attract assets from both millennials and Generation Z. A Policygenius survey published this week found that millennials were more likely to own bitcoin than any other generation, and Gen Z was more likely to own bitcoin than stocks, bonds or real estate.

But Milling-Stanley pushed back on the idea that gold and bitcoin are competing for assets across the board.

“Bitcoin may well be some competition for the people who want to take a tactical position in gold and just wait for the price to go up and sell. I think that bitcoin may well offer competition there,” he said. “But I don’t think that bitcoin really competes in terms of a long-term strategic allocation, and that’s where I think gold really comes into its own.”

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