World’s biggest money managers are rebuilding gold positions

Major investment firms are rebuilding their gold holdings after prices fell, anticipating the metal's long-term value despite the Federal Reserve's push to curb inflation. Amundi SA, Europe's top asset manager, recently increased its purchase of bullion, anticipating it could hit $5,000 per ounce by year-end. Several other fund managers, including Pictet Asset Management, Robeco Institutional Asset Management, and Fidelity International, also added back to their gold positions after cutting them earlier this year amid the metal's decline from a record high.

Lorenzo Portelli, head of cross-asset strategy at Amundi, noted that gold is "cheap," a good hedge, and reasonably liquid. However, more clarity on the Federal Reserve's interest-rate plans would be necessary before the firm could expand its purchases further, a sentiment echoed by other money managers. All interviewed asset managers either increased their gold allocations or maintained bullish positions.

Yet, a breakthrough above the recent $4,600 ceiling is not guaranteed, as higher Treasury yields and the Fed's potential for additional rate hikes before year-end threaten support for the precious metal.

Despite these challenges, the renewed focus on gold stems from its role as a hedge within diversified portfolios. "It's become a much more acceptable asset," said Arnout van Rijn, a portfolio manager at Robeco, which oversees $464 billion in assets. The metal's appeal is rooted in its ability to protect investors during economic uncertainty.

Since the metal's frantic rally in January, when speculative activity pushed prices above $5,600, it has since retraced to around $4,400. Michael Cuggino, president of the Permanent Portfolio Family of Funds, sees a "long-term macro story" in favor of gold, expecting "higher highs and higher lows" as central banks increase purchasing and investors seek broader portfolio protection.

The increased demand from central banks, particularly in the second quarter, contributed to a surge in net purchases of 289 tons, the highest for any second quarter on record, according to the World Gold Council. Sophie Huynh, a portfolio manager at BNP Paribas, also noted the fading correlation between gold and risk assets, indicating that the metal's traditional value as a hedge is resurfacing.

Gold's recovery is also driven by "fundamental drivers such as central-bank purchases and multi-asset managers looking for a portfolio hedge." This renewed interest is evident in the Commodity Futures Trading Commission's data, which shows net-long positions in gold hitting their highest level in this year's week ended Aug. 25.