Money managers are taking part in a gold rush — in some cases for the first time in years — as the precious metal regains its shine in a world of negative interest rates and jittery markets.
The trend is particularly noticeable in multiasset portfolios and in exchange-traded products.
“In a world where interest rates go down and stay low, gold becomes interesting as it has got (fewer) competitors,” said Marino Valensise, London-based head of multiasset at Baring Asset Management.
Recent interest rate cuts into negative territory in Europe and Japan are good for gold, he noted.
“On the other side, you have got the U.S. tightening rates, but what has happened in the last three months is a lot of people (have) realized the (Federal Reserve) might go much slower than was originally anticipated, so all those expectations of tightening coming down have given gold a little bit of a shine,” Mr. Valensise said.
A stable dollar — the currency in which gold is priced — is also good for gold.
Baring added a 3% position in gold “for the first time after many years in January ... and with the benefit of hindsight we should have bought more, but it was a first significant step after many years of being absent from that market,” said Mr. Valensise, referring to the money manager's £1.7 billion ($2.4 billion) Dynamic Asset Allocation fund.
Institutional investor net inflows to gold strategies have totaled about $11 billion this year through March 16, according to data provided by EPFR Global. That compares with about $2.5 billion of net outflows over the three months ended Dec. 31.
Some strategies have struggled to cope with increased demand for exposure to gold. iShares Delaware Trust Sponsor LLC, sponsor of the $7.6 billion iShares Gold Trust, said March 4 that a surge in gold demand among global investors since the start of 2016, in response to global macroeconomic conditions, “led to the temporary exhaustion” of available shares, and required it to file with the Securities and Exchange Commission to register new shares.
Some money managers are launching new strategies to take advantage of the gold rush: Old Mutual Global Investors said it will start a gold and silver fund this month, which a spokeswoman said will be available to both institutional and retail investors.