Long Gold Becomes the Most Crowded Trade Among Fund Managers
According to Bank of America's (BofA) latest "Global Fund Manager Survey for October," gold has emerged as the most prominent trade in investor asset allocations, becoming the most crowded trade. As inflation expectations soften and the Federal Reserve's signals of easing become more pronounced, market risk aversion has intensified, channeling funds back into gold as a primary investment.
The survey shows that over 40% of surveyed fund managers believe that gold prices have more room to rise in the next three months, reaching the highest proportion in 2023. Analysts point out that with the Federal Reserve potentially beginning a rate-cut cycle by the year's end, falling real interest rates have become a critical support for gold’s appreciation.
Additionally, the recent weakening of the dollar has further enhanced the appeal of precious metals. Some institutions predict that if the Federal Reserve cuts rates in October or December, gold prices could surpass the psychological threshold of $2,600 per ounce.
Investor Risk Appetite Increases, Stock Market Optimism Grows
Although gold remains the most popular haven asset, the survey results also indicate a rising overall risk appetite among investors. Global fund managers' optimism towards the stock market has risen to its highest level since February of this year, suggesting increased confidence in a soft economic landing.
Bank of America notes a significant increase in investor willingness to allocate funds to the technology, energy, and financial sectors, especially for stocks related to artificial intelligence, semiconductors, and renewable energy.
However, this optimism is also accompanied by concerns over potential risks. The survey reveals approximately 34% of respondents believe the stock market is climbing too rapidly, with valuations perceived as "elevated," notably in AI-related stocks, which are considered to exhibit signs of a structural bubble.
"AI Bubble" Identified as the Biggest Tail Risk
The Bank of America survey shows that fund managers widely regard the "bursting of the AI bubble" as the current market's biggest tail risk, surpassing concerns over geopolitical conflicts and inflation rebounds.
Since the beginning of 2024, the market capitalization of global AI-related stocks has increased by over 40%, with the price-to-earnings ratio of some leading firms returning to levels seen during the internet bubble. The survey highlights that while artificial intelligence is still viewed as a vital technology for boosting productivity, its investment logic is gradually shifting from "growth certainty" to "expectation overspending."
Bank of America strategists state: "The valuations of AI-related stocks are already too high, and if profit growth fails to meet expectations, investor sell-off sentiment may spread rapidly, triggering widespread market adjustments."
Gold and AI: The Two Extremes of Market Divergence
Notably, the survey highlights a stark divergence in funding between "traditional safe-haven assets" and "high-growth sectors." Allocations to gold, U.S. Treasuries, and cash positions have all increased, while the growth of holdings in high-risk tech stocks has slowed.
Analysts believe this divergence reflects investors' cautious attitude towards the global macroeconomic landscape. Although the market continues to chase the dividends of technological innovation in the short term, under an environment of declining interest rate cycles and inflation uncertainties, gold's defensive attributes are being reevaluated.
Market Might Enter a "Gold and AI Resonance Period"
In its report, Bank of America indicates that the market may enter a "gold and AI resonance" phase in the coming quarter: on one hand, easing policy expectations are driving up precious metal prices; on the other hand, the realization of earnings in the AI sector and risk release will jointly determine the long-term trend of the technology sector.
The report concludes: "The current market is characterized by 'dual driving forces'—gold reflects risk aversion and monetary easing expectations, while AI represents innovation and growth potential. Their interplay will dictate the rhythm of the global capital markets by 2025."
