Gold's Demographic Problem

We all know there is a lot of discussion about Bitcoin versus Gold. It arises a lot of emotion on each side.

That said, there are some issues with gold that we must consider. After all, commodities tend to be the epitome of supply and demand. Alter one side of the equation and prices can move in a large manner.

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Gold has a long track record. The use case for it goes back hundreds of years (even thousands). So it is hard for people to fathom how something that established could be upended. Yet that could be what we are seeing happen.

One of the biggest problems is one of demographics.

Gold Buyers Are Starting To Die Off

It is no secret that Gold is preferred by the Boomers. This is an asset class that they fell into and favor as a fallback. However, this is going to cause a problem as we move forward.

At the other end of the spectrum are the Millennials. They now outnumber the Boomers in the United States by a large number.

We also see those who are at two different ends of the financial spectrum. Boomers are exiting the work force while Millennials are coming into positions of power.

Then we have the situation of death. The Boomers are at that age where the end arise. This is a group that was born between 1946 and 1964. The first of them is turning 75 this year. While that is no longer considered old, a fair portion of people die off before that age.

According to Incender.com, more than a quarter of the Boomers in the U.S. already passed away.

As we can see more than 27% of them are no longer alive. What is worse is that more than 5,100 are passing away, on average, each day. This is a number that is going to increase as the entire generation heads toward their 70s and 80s.

What happens when a products customers start to die off? It usually is a sign of trouble. Unless it can somehow tap into the younger generation, the writing is on the wall. We saw it with a number of things that were part of a particular generation. The nightly news is a prime example. Their ratings dropped as the Greatest Generation started dying off. The younger generation simply did not embrace that form of news delivery. Once the Internet showed up, the Boomers (who were a younger generation at the time) embraced that and had newsfeeds everywhere.

Could the same thing be happening to Gold?

Millennials Are Into Bitcoin

Here is where the issue comes from. It appears that Gold is not capturing the attention of the younger generation. While it was probably easier in the past, now there is another alternative.

Bitcoin is now on the radar of the Millennials. They are the ones flocking to it. After all, technology is something they grew up with and know intimately. They are not scared to have to learn something new with an application. This makes them prime candidates to embrace this new form of value, unlike previous generations.

How much of a difference is there?

According to Bloomberg analyst Eric Balchunas from an interview with CCN

“When we talk to our younger clients - we have a core gold allocation in our portfolios, and they’ll ask about that and say, ‘What about crypto?’ And if you talk to, primarily millennials, and ask them which they prefer, bitcoin or gold, it’s a landslide. It’s not even close, it’s like 90% prefer bitcoin.”

That is a huge margin. Granted this is just one survey and other estimates have it ranging from about 65% up to that 90% level. Whatever the accurate number is, we can see how Millennials favor Bitcoin far more than Gold.

Long-term, if the trend continues, this will create big problems. To start, these same Millennials are going to start taking over positions within governments, banks, and wealth funds. It will be they who are making the decisions over large sums of money.

The second is we are moving more into a digital world with a large group of people who are raised in that realm, at least to a degree. That crossover to that arena is going to be far less difficult than it is for the older generations.

Hence, what do you think they will opt for as their store of value? Little yellow pieces of metal or something that is digital in form that can be moved around easily and for little money?

Things could change of course but this is the pattern that is being laid. From the Millennials I came across, most fit into this category. They might opt for both, this could change if Gold does not outperform like Bitcoin has done the last decade.

A lot of long time beliefs are being challenged by technology. This one is tied to the demographic view of things. The technology is being embraced by the Millennials.

In 20 years, most of the Boomers will not be around. The ones that are will be part of the cared for aspect of the economy. It will be the Millennials and Gen Z's show.

There are other issues that could be confronting gold but this is a major one that is fairly obvious and likely to happen since the trend is already forming.

What are your thoughts? Leave them in the comment section.

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