Gold Nears $3,800 Mark, But Expert Says 'We Aren't Anywhere Close To Gold Fever Yet:' 39% Of Fund Managers Have 0% Allocation
News Summary
Gold prices extended their rally on Monday, nearing $3,800 an ounce, primarily driven by robust demand and ongoing economic uncertainty, which has strengthened its safe-haven appeal. Despite prices reaching near-record highs, a key survey of institutional investors indicates that a speculative frenzy has not yet taken hold, suggesting there could be more room for the rally to run. Data from a recent Bank of America Global Fund Manager Survey highlights that 39% of fund managers still have zero allocation to the precious metal in their portfolios. While this figure is down from 47% in August, it points to significant untapped investment potential. Ryan Detrick, chief market strategist at Carson Research, commented, "This is simply amazing, but it also shows we aren't anywhere close to gold fever yet." The rally is instead underpinned by robust physical demand from key markets and a flight to safety. China's non-monetary gold imports surged to 104 tonnes in July, well above the five-year average. Additionally, demand in India is anticipated to pick up with the start of the festival season. Gold market expert James Turk has pegged a near-term price target of $4,000 for gold. Economist Peter Schiff noted Morgan Stanley's revision of the classic "60/40" portfolio to include gold, a move he argues is tantamount to a "sell" rating on U.S. Treasuries.
Background
Currently, the global economy continues to face uncertainties, and geopolitical tensions are escalating, prompting investors to seek safe-haven assets. In 2025, under President Trump's administration, global trade relations and monetary policies may experience fluctuations, further underpinning gold's safe-haven appeal. Central banks, particularly those in emerging market economies, are actively increasing their gold holdings and reducing their exposure to U.S. Treasuries, reflecting a significant rebalancing of global reserve asset allocations. Furthermore, robust physical gold demand from key consumer nations like China and India continues to provide a solid foundation for gold prices.
In-Depth AI Insights
What deeper drivers and potential market biases are reflected by the substantial zero allocation among institutional investors, even as gold hits new highs? - This suggests a potential lag or path dependency in institutional investment decisions, where many fund managers remain constrained by traditional asset allocation frameworks and have not fully recognized the fundamental shifts in the macroeconomic and geopolitical landscape. - Such low allocation could stem from an inherent bias against gold as a "non-yielding asset," or a misjudgment of the persistence of global inflation and the long-term trajectory of the U.S. dollar. - The "uninvested" status of institutional capital implies significant potential upside for gold prices once these funds begin to allocate on a larger scale, though it could also temporarily increase volatility as the market absorbs such position adjustments. How does the trend of global central banks increasing gold holdings and reducing U.S. Treasury holdings strategically impact the global financial system and dollar hegemony? - This represents a long-term challenge to the U.S. dollar's status as the primary global reserve currency, reflecting central banks' strategic intent to diversify reserves and reduce reliance on a single currency. - The Trump administration's "America First" policies may exacerbate trade friction and geopolitical tensions, prompting central banks to view gold as a more neutral and secure store of value. - In the long run, this will diminish the traditional safe-haven appeal of U.S. Treasuries, increase U.S. funding costs, and could accelerate the formation of a multipolar international monetary system. Considering the current drivers of gold's rally, what are the key long-term investment risks and opportunities? - Opportunities: Persistent geopolitical uncertainty, structural inflationary pressures, and the ongoing de-dollarization trend among central banks will continue to provide fundamental support for gold. The potential for incremental demand from under-allocated institutional investors is a significant long-term tailwind. - Risks: A potential global economic recession could trigger a liquidity crisis, leading to short-term selling pressure on gold to meet margin calls. Additionally, aggressive tightening policies by major central banks or an unexpected de-escalation of geopolitical risks could also put pressure on gold prices.