- A net 16% of fund managers now view gold as undervalued, up from 6% in July and the highest since March 2023.
- Gold prices have tumbled from January's peak above $5,300 an ounce to around $4,450, but the shift in sentiment could signal a bottom.
- The renewed optimism may bolster gold ETFs and mining stocks, while potentially weighing on the dollar and real yields.
A Shift in Sentiment
Gold is looking increasingly attractive to professional investors, according to Bank of America's latest fund manager survey. The August poll shows a net 16% of respondents believe the precious metal is undervalued, a significant jump from just 6% in July. This marks the most bullish reading since March 2023, suggesting that the recent selloff may have gone too far.
Price Context
Gold has had a rough year, with prices falling sharply after hitting an all-time high above $5,300 an ounce in January. By August, the metal was trading around $4,450, a drop of more than 15% from its peak. On Tuesday, New York gold contracts slipped another 0.5% to settle at $4,450.30 an ounce. The pullback has been driven by a stronger dollar and rising real yields, but some investors now see value emerging.
What This Means
The survey's findings could have significant implications for the market. A shift toward viewing gold as undervalued often precedes a rebound in prices, as fund managers increase their allocations. This could provide a floor under gold, potentially boosting gold-backed ETFs and mining stocks. Conversely, if gold gains traction, it might put pressure on the dollar and real interest rates, which have been headwinds for the metal.
While not all investors are convinced, the sentiment change is notable. “It’s a contrarian signal that might be worth heeding,” one portfolio manager noted, speaking on condition of anonymity. “The market has been overly pessimistic on gold, and the tide may be turning.”
As always, the survey reflects opinions, not certainties. But with gold at these levels, the risk-reward may be shifting in favor of the bulls.