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Substituting cryptocurrency for gold exposure may be a costly mistake

BusinessSubstituting cryptocurrency for gold exposure may be a costly mistake


The gist on gold: ETF plays in the digital age

Viewing cryptocurrency as “digital gold” may be a mistake.

State Street Global Advisors’ George Milling-Stanley, whose firm runs the world’s largest gold exchange-traded fund, believes cryptocurrency is no substitute for the real thing due its vulnerability to big losses.

“Volatility does not back up any claims for crypto to be a long-term strategic asset as a competitor to gold,” the firm’s chief gold strategist told CNBC’s “ETF Edge” earlier this week.

Milling-Stanley’s firm is behind SPDR Gold Shares, the world’s largest physically backed gold ETF. It has a total asset value of more than $57 billion as of last week, according to the company’s website. The ETF is up 7% year to date as of Friday’s market close.

Milling-Stanley believes gold’s 6,000-year history as a monetary asset serves as a significant sample basis to understand the benefits of investing in gold.

“Gold is a hedge against inflation. Gold’s a hedge against potential weakness in the equity market. Gold’s a hedge against potential weakness in the dollar,” he noted. “To me, historically, the promise of gold for investors has … overtime [helped] to enhance the returns of a properly balanced portfolio.”

The precious metal is having trouble this year staying above the $2,000 an ounce mark. But Milling-Stanley believes the economic backdrop bodes well for gold — recession or not.

“It’s pretty clear that we’re liable to be in a period of slow growth. … Historically, gold has always done well during periods of slower growth,” Milling-Stanley said.

Milling-Stanley also believes the relaxation of Covid-19 restrictions in China should spark more demand for gold. It’s known as the world’s largest consumer of gold jewelry behind India, according to the World Gold Council.

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“It’s not just China and India. It’s Vietnam, it’s Indonesia, it’s Thailand and Korea. It’s a whole raft of Asian countries that are really the main drivers of gold jewelry demand,” Milling-Stanley said.

Gold settled at $1,960.47 an ounce Friday. The commodity is up more than 7% so far this year.


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