This week marked the 22nd edition of the Mining Forum Europe in Zurich. For a long time, it was an insider-only event mainly attended by mining companies, but with the recent surge in the gold price, there was much more room this time for a broader, macro-driven perspective.
And as a dedicated gold investor, I was invited to share my views. That turned out to be a real eye-opener for many attendees—despite the industry they work in.
Wealth transfer
One of the charts that really resonated is shown below. It illustrates the expected transfer of wealth from Baby Boomers (people aged 60 and older) to younger generations. According to consulting firm Cerulli Associates, an astronomical sum of 72 trillion US dollars is expected to flow toward Generation X, Millennials, and Generation Z.
These younger generations are about to receive a significant amount of capital. And they think very differently about money, investing, and especially about what belongs in a well-diversified portfolio. According to most Baby Boomers, a traditional 60/40 portfolio—with 40 percent in bonds—is a solid way to build wealth for retirement. That’s not surprising, as they lived through a time when bonds still yielded decent returns, and they’ve generally been well taken care of when it comes to pensions.
That’s not something the average Millennial can count on. As a result, they tend to see little value in a standard portfolio based on the two classic asset classes: stocks and bonds. Bitcoin, crypto, precious metals, and other alternatives play a far more significant role for them.
So it’s no surprise that Cerulli and others conclude this will lead to a structural shift in how portfolios are constructed. The preferred strategic asset mix of a 65-year-old looks fundamentally different from that of a 30-year-old.
New leadership
But there’s more. Among those Millennials—let’s focus on this group for simplicity—are the new leaders, the future policymakers, and the upcoming trustees of our pension funds, asset managers, and financial planners. The fact that entire organizations and their investment policies will soon be driven by younger generations shouldn’t be underestimated.
Dinosaurs
Back to Zurich. After the presentation, several people approached me saying they had genuinely heard something new. Because to make gold an interesting investment—or to keep it that way—there’s no need for a doomsday scenario. You don’t have to put hardcore pessimists on a stage to conclude that gold is here to stay. Humanity has come quite a long way over the past 5,000 years.
I firmly believe that gold will remain the primary store of value in our debt-driven financial system for the foreseeable future. Governments continue to issue massive amounts of debt, and even as trillions of euros and dollars are printed, nothing needs to break—as long as the system becomes more balanced (that’s the key condition) through an even faster increase in the price of gold.
If you assume that younger generations understand this better than Boomers—simply because of their different life experiences—then the “Great Rebalancing” will soon gain much broader support. Simply because their view on money and investing is just a bit different.
Let’s just hope I get invited back next year to see whether the group has become a little more diverse by then.
Jeroen Blokland analyzes striking, timely charts on financial markets and macroeconomics in his newsletter The Market Routine. He also manages the Blokland Smart Multi-Asset Fund, which invests in stocks, gold, and bitcoin.