Recently, there has been a growing interest among Reddit investors to invest in gold rather than stocks. This trend shows that small investors are worried about economic uncertainty and see gold as a safe haven asset. Gold prices hit record highs in 2020 as central banks increased stimulus spending. At the same time, stock markets became very volatile. These factors have made gold more attractive for Reddit investors compared to equities.
Reddit investors lose faith in stock picking due to market volatility
The COVID-19 pandemic and ensuing economic crisis made the stock market extremely volatile in 2020. Major indexes like the S&P 500 saw huge swings as virus cases ebbed and surged. Many Reddit investors got burned trying to pick winning stocks in this climate. Losing money has caused small investors on threads like r/investing to give up on stock picking and shift to gold.
Gold seen as hedge against currency devaluation
With central banks printing trillions in new money, many Reddit investors fear inflation and a devaluation of major currencies. This makes gold appealing, as it often rises when fiat currencies fall. Many posts on r/investing advocate holding 10-20% of assets in physical gold and gold ETFs to diversify from ‘money printing’.
Demand for gold surges while mining output declines
In 2020, demand for gold from investors and central banks reached record levels. At the same time, lockdowns and operational issues severely hampered gold production by the top mining companies. This supply and demand imbalance helped push gold prices to an all-time high. Many Redditors see this trend continuing and recommend investing in gold mining stocks.
In conclusion, Reddit investors are losing faith in the stock market due to high volatility and economic uncertainty. Meanwhile, gold demand is rising while supply is constrained. As a result, more small investors are advocating shifting assets from stocks to physical gold and gold-related investments.