BAML Survey: Gold Undervalued and Best Protectionist Hedge
A record proportion of fund managers have said gold is undervalued and have backed its safe haven qualities in the event of a rise in anti-trade policies.
Gold was viewed as the best hedge against protectionism by a third of investors, and a record 15% of respondents consider it now to be undervalued.
The interest in gold comes as other popular safe trades appear strained. Geopolitics also continue to weigh on sentiment more broadly.
When asked to describe the biggest tail risk, 36% of respondents said European elections and the associated disintegration risk in the Eurozone. Some 32% identified the prospects of a trade war, while 13% talked of a crash in global bond markets.
Such concerns come against the backdrop of bullish expectations. According to research, macro optimism was surging, with 23% of investors saying they expected a boom, compared with a mere 1% a year earlier.
However, 43% expected secular stagnation to emerge, down significantly from 88% a year ago.
On a regional basis, fund managers appeared to be taking advantage of bearish sentiment. Eurozone equities saw allocations rise to eight-month highs, with net 23% overweight, compared with 17% the month before.
Emerging market equities, which began to perform well last year but then suffered at the hands of protectionism fears, saw allocations improve to net 5% overweight, up from net 6% underweight the month before.
Sentiment on Japanese equities also appeared to be strengthening, with the proportion of investors wanting to be overweight the country in the next year rising from 9% to 14% in a month.