NEW YORK, July 18 (Reuters) - What asset class do

millennials and Gen Z investors both want to own?

Here is an answer you may not have guessed: Gold.

Among wealthy investors under the age of 43, 45% own gold as

a physical asset, and another 45% are interested in holding it,

according to a recent study by Bank of America Private Bank.

Those are far higher percentages than other age groups.

Usually this demographic is not interested in assets like

gold, cash or Treasuries, because they are considered to be

"boring," says Liz Young Thomas, head of investment strategy for

digital financial services firm SoFi.

"As Treasury yields rise, cash is paying a high interest

rate, and gold is rising along with it. We are seeing returns we

normally don't see in such a short period of time," Thomas says.

"Naturally, when assets have strong returns, younger audiences

start to perk up."

This confirms another study by money managers State Street,

which finds that millennials have the highest allocation to gold

in their portfolios, at 17%, far outpacing both boomers and Gen

X at 10%.

So what is going on? Why are younger investors so intrigued

by a somewhat stodgy asset that has been around for thousands of

years?

Part of gold's renewed buzz is its healthy spot price, which

as of this writing is above $2,400 per ounce.

It is also increasingly on the shelves in popular retail

environments, which boosts visibility. Big-box chain Costco

started selling 1-oz gold bars last fall and has been doing a

brisk trade of up to $200 million monthly, according to Wells

Fargo estimates.

Since younger investors' interest has been piqued, what

golden rules should they keep in mind? A few thoughts from the

experts:

OWNING PHYSICAL GOLD CAN BE TRICKY

Part of the appeal of gold is that it is tangible. If the

world's financial system happens to go haywire, or currencies

collapse, at least you would have something real to hold onto.

"I have found with my millennial clients that as they get

wealthier, they are more interested in investing in

directly-held, self-custodied gold," says Eric Amzalag, a

financial planner in Canoga Park, California, whose clients tend

to use online precious metals retailer APMEX. That is because

investment goals often shift from growth to capital

preservation, Amzalag adds.

With physical gold you have unique challenges like: finding

a reputable dealer who won't take advantage of you; getting it

delivered and stored securely; insuring your purchase; And then

figuring out how to eventually sell it, since Costco is not

about to buy that gold bar back from you.

To protect your portfolio, check out this advisory guide

from the World Gold Council.

CONSIDER ETFS

An exchange-traded fund - either backed by physical gold, or

one that invests in gold futures - takes away the problems of

buying, storing and selling. It also makes asset exposure

relatively easy.

"There are some fees associated with that, but ETFs are a

nice alternative if you don't want to actually take delivery of

bullion and hold it in your basement," says SoFi's Thomas.

The largest such ETF, SPDR Gold Shares (GLD), carries an

expense ratio of 0.4% and boasts one-year returns of more than

23%. A similar approach is to buy an ETF comprised of mining

stocks, such as VanEck Gold Miners (GDX), which includes the

biggest names in the sector like Newmont Corp. and Barrick Gold.

DO NO GO OVERBOARD ON ALLOCATION

Gold can certainly serve a purpose in a portfolio, as an

uncorrelated asset and a potential hedge against inflation or

volatility. But, as a commodity, it can also be quite volatile

and fall in and out of favor with investors.

As such, equities should still be the main portfolio entrée

for most investors, experts say. Companies that generate sales,

earn profits, pay dividends and offer potential share-price

appreciation make for a more dynamic asset class with superior

long-term returns.

As for gold, younger investors may keep it as a

complementary side dish, says Jonathan Cameron, a financial

planner in Miami.

"We work with many young professionals, and we have been

including a gold ETF (about 5%) in many of our clients'

portfolios as a hedge for several years," Cameron says.

"Everyone likes this decision."

(Editing by Lauren Young)