World's biggest money managers are rebuilding gold positions

Amundi SA, Europe’s largest asset manager, bought bullion on the expectation it will return to $5000/oz by year-end. Fund managers at Pictet Asset Management, Robeco Institutional Asset Management and Fidelity International also added to holdings cut earlier this year, during bullion’s retreat from an all-time high.

“Gold is an asset that we consider to be cheap, a good hedge and reasonably liquid,” said Lorenzo Portelli, head of cross-asset strategy at Amundi Investment Institute. But greater visibility over the Fed’s interest-rate path would be needed, he said, before the firm would consider adding to last month’s purchases.

That was a common theme in interviews with more than a dozen asset managers, whose firms manage a combined $27-trillion. Without exception, each of them – including BNP Paribas Asset Management and Manulife John Hancock Investments – had either added back gold in recent weeks or were maintaining bullish allocations.

But any breakout above gold’s recent ceiling near $4600/oz won’t be smooth, many of the money managers said. Higher Treasury yields and increased bets for at least one Fed rate hike before year-end are undermining support for bullion, an asset that tends to be less favored when borrowing costs rise, because it doesn’t pay interest.

Investors’ resolve was tested by Fed chairperson Kevin Warsh’s Aug. 28 speech at the central bank’s Jackson Hole symposium, where he warned that US inflation isn’t meaningfully slowing toward a 2% target – comments that triggered increased bets on monetary tightening.

So far, these potential speed bumps haven’t shaken the renewed conviction of long-term investors. Gold’s enduring appeal, some of the money managers said, lies in its value as a hedge within a broader investment portfolio.

“It’s become a much more acceptable asset,” said Arnout van Rijn, a portfolio manager for multi-asset and equity solutions at Robeco, a Dutch firm that oversees some $464 billion in assets. “It’s become part and parcel of every regular or normal portfolio.”

After a blistering rally backed by speculative capital took gold to an all-time high near $5600/oz in January, the metal has spent much of this year in retreat. Elevated energy prices and inflationary shocks from the Iran war dragged it back to near $4 000/oz in June. That’s when funds began to show interest.

“The downdraft to $4 000/oz, if you didn’t own it already, was a very good buying time,” said Michael Cuggino, president of the Permanent Portfolio Family of Funds. “The long-term macro story is still in place, and that’s bullish for gold,” he said, adding that “higher highs and higher lows” could be expected over time.

For Robeco’s van Rijn, the catalyst for buying gold again was an acceleration in central-bank purchases during the second quarter. Official-sector demand recovered sharply between April and June, with net purchases of 289 tons the highest for any second quarter, according to the World Gold Council.

Sophie Huynh, a portfolio manager and strategist for dynamic-asset allocation at BNP Paribas, was drawn back by a fading correlation between bullion and risk assets like equities – a trend that suggests gold’s traditional value as a hedge has returned after a period of speculative trading.

“The froth of gold has come off,” said Huynh. Instead, the metal is being powered by “fundamental drivers such as central-bank purchases and multi-asset managers looking for portfolio hedge,” she added.

That renewed appetite for gold is reflected in funds’ net-long position tracked by the Commodity Futures Trading Commission, which rose in the week ended Aug. 25 to its highest level so far this year.

In one of the starkest warnings of recent weeks, Ray Dalio, the billionaire founder of Bridgewater Associates, said investors should reduce their bond holdings and put as much as 15% of their money in gold to hedge against the risk of a US debt crisis.

His comments came as long-term US Treasury yields rose to multiyear highs, a trend that prompted Treasury Secretary Scott Bessent to announce more buybacks of long-dated debt. The unexpected move caused gold to spike and revived interest in the so-called debasement trade – like central-bank buying, another pillar of gold’s 2025 rally.

“You’re seeing money move out of the dollar and into hard assets — gold, Bitcoin being some of that — because there’s a loss of confidence in our fiscal credibility,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial, referring to the US.

Bullion’s recent recovery, added Kevin Khang, head of global economic research at The Vanguard Group Inc., “is very consistent with people being concerned about the US dollar again as a store of value.”

Some of the asset managers interviewed by Bloomberg News said alarm around the world’s dominant reserve currency was overstated, but most agreed that a steady shift toward more diversified portfolios would provide a lasting platform for bullion to appreciate.

Though there’s “no obvious replacement” for the dollar, according to Christopher Hamilton, head of client investment solutions for Asia-Pacific at Invesco, that doesn’t prevent investors from “increasing diversification at the margin,” which may prove to be a more sustainable trend than any dramatic shift.

Gold, after all, makes up a relatively small share of Western investors’ portfolios, particularly after years of stunning gains in US equities. That means that even modest diversification has the potential to move bullion prices sharply.

And no matter how the Fed tries to tackle inflation – and the effect of these efforts on the gold price – investors are still inclined to hold bullion as a counter to macroeconomic and geopolitical uncertainty, said Tracy Chen, a portfolio manager at Brandywine Global Investment Management.

Gold “should still hold value as a hedge against what the Fed can’t control,” she said.