For Older Investors, Gold Doesn't Seem to be Aging That Well

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By Chris Fichera

Investors hold gold for any number of reasons: inflation hedge, portfolio diversifier, risk reducer. Some do for fear of a collapse of our global financial system. Whatever the reason, few gold bugs likely feel good about the yellow metal's slide to a nearly 4½

-year low at around $1,150 an ounce. It's a long, painful ways down from gold's high of nearly $2,000 in late 2011.

%VIRTUAL-WSSCourseInline-990%Of investors who track their portfolios with SigFig and own SPDR Gold Trust (GLD), 86 percent are underwater on their investments, with a median 16 percent loss. The typical (median) investor holds about $6,200 worth of gold, translating to a $1,000 loss, or about the value of a single 1-ounce American eagle gold coin.

Who Are the Gold Bugs?

One of the easiest ways to invest in gold is through ETFs that tracks the price of gold. The largest of these in asset size is the SPDR Gold Trust. Buying its shares places a bit of gold for you in HSBC (HSBC) Bank's London vaults, so you don't have to bolt a safe to your basement floor.

Not surprisingly, SigFig investors who own GLD trend higher in age: older investors focus more on wealth preservation, and they've lived through high-inflation periods. Just 1.5 percent of millennial-age investors hold the Gold Trust, compared with 3 percent of 30-somethings and 6 percent for investors in their 70s.

Unfortunately, that's around the age range gold's slide might hurt the most. And while GLD investors have put on average $24,000 into the ETF, those in their 60s and 80s have invested two to three times as much as those who are 40 or younger.

Will the Bubble Burst?

Pundits will give any number of reasons for gold's decline and when it will end. At some point, they'll be talking about when to get back into the gold trade.

Allocating a small portion of your assets -- around 2 percent -- to gold is not uncommon financial advice, but advice on a proper allocation to gold is often vague.

Some rather decent investors -- like Warren Buffett -- never touch the stuff. One of Buffett's more famous quotes came from a speech at Harvard University: "It gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

What he means by "no utility" is that gold produces nothing and pays no dividend. It also has ongoing holding costs and gets taxed at a higher rate than the long-term capital gains rate for stocks.

Allocating a couple percent of one's assets to gold may not mean much in the face of a doomsday scenario or hyperinflation. But if you're holding gold and are feeling sore these days, there is one silver lining: you could be holding silver. That metal has lost 27 percent of its value over the past year, making gold's 10 percent slide seem (almost) tolerable.

Chris Fichera is a contributing writer at SigFig. Nearly a million people use SigFig to track, improve and manage over $300 billion in investments.