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Generalist Investors: Double-Edged Sword for Gold and Silver Stocks

by Lobo Tiggre
Thursday, July 30, 12:10pm, UTC, 2020

My research on Robinhooders getting involved in the monetary metals space has generated a huge amount of interest. And concern. Long-time gold bugs don’t trust young, momentum-chasing investors to stick with gold and silver—let alone the stocks.

This is not without good reason; by definition, generalists are not gold bugs.

Those of us who’ve been expecting this gold breakout for a long time should not expect loyalty from newcomers.

Momentum flows in and out. We should make the best use of it while it’s on our side.

And I think it’s only prudent to lock in gains when the tide turns against us, even if temporarily.

So, I don’t hate young investors for only joining the party when it’s fun. If I’m right about value investing being a better strategy over the long term, reality will teach this lesson to anyone paying attention.

That said, the data thus far do not show Robinhooders bailing out on gold at the first sign of trouble, as many veterans of the gold space feared.

Consider this Robintrack chart for GLD over the month of July. (I know GLD is not gold, but it’s a useful proxy for this exercise.)

 

Robintrack GLD July 2020

 

As you can see, gold has retreated after reaching new all-time-highs, but the number of Robinhooders owning GLD has barely budged.

As a quick aside, the number of Robinhooders who’ve hopped on the gold bandwagon since I wrote about this two weeks ago has increased by about 33%. This isn’t the only rising generalist tide, but it’s a clear indicator that recent price action has put FOMO on gold’s side.

But a two-year chart tells us something even more interesting…

 

Robintrack GLD July 2019 - 2020

 

The times in circles when gold retreated for a time—including quite sharply last March—saw no material change in the number of Robinhood users long GLD.

Now, this doesn’t prove that younger investors won’t help crush gold prices if a large portion of them decide to head for the exits.

But it tells me that a lot of them understand why gold is up—and they expect it to go higher.

I should pause, however, and remind readers that there’s no upper age limit on Robinhood. It’s likely that many of the systems’ users that are into gold and silver are among Robinhood’s older clients.

Still, given what we hear about the young age of most Robinhood users, by far, I think this data does tell us something about the way younger investors see gold and silver—and it’s very bullish.

I can also add, anecdotally, that I’ve heard back from many young people in response to my research in this area that they are not just playing around with momentum on Robinhood. Many own gold—physical bullion—which I find extremely encouraging.

And remember that Bitcoin has trained many young investors to HODL (hold on for dear life) when it comes to investment theses they believe in.

In truth, I think it’s dangerous to be “loyal” to any investment thesis in the face of contrary evidence. Anyone can be wrong. We should not cling doggedly to losing investments just because we think the world and its markets should go in a different direction from the one it’s clearly taking.

But it is what it is, and the data thus far tells me that we shouldn’t assume that new generalist investors—young and old alike—will give up on gold and silver immediately.

Most have just woken up to the potential. They’re excited. And they understand the idea of buying the dip on assets they believe in.

One more thing…

If the surge of generalist attention does turn against gold and silver in the near term, it won’t affect the fundamentals at all.

As a speculator still looking to buy, I almost wish monetary metals new friends would bail out in one great big rush.

This would create a terrific buying opportunity. Absent another general market crash, it could be the best opportunity we’ll see all year.

I’m not predicting this.

But I am accumulating cash in case it does happen—or that broader market meltdown.

For now, with gold wobbling after its all-time-highs, I’m being very careful about any buying I do.

Caveat emptor,

 

 

P.S. To be kept abreast of more opportunities, dangers, and issues affecting investors, please sign up for our free, no-spam, weekly Speculator’s Digest.

 

 

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