A portfolio manager at Fidelity International Ltd. has doubled his fund’s gold holdings over the past three weeks, citing increasing uncertainty over US Federal Reserve policy as a catalyst.
After raising the proportion of bullion in the fund to a self-imposed limit of 5%, George Efstathopoulos said he would consider lifting this ceiling should the safe-haven status of the US dollar continue its decline. He began his recent accumulation after the investor retreat from long-dated Treasury bonds that followed the Fed’s July meeting.
“My translation of that is the lack of Fed credibility and more policy uncertainty,” Efstathopoulos said in an interview on Monday.
Gold has seen a marked rebound in recent weeks, hitting a three-month high and climbing above the crucial 200-day moving average that’s often viewed as a bullish technical signal. The latest leg of the rally was prompted by the US Treasury’s bold intervention in the bond market last week, which revived concerns about a weaker dollar and pushed investors toward alternative assets.
Highlighting the recent advance, hedge funds’ net-long position in gold for the week ended Aug. 18 was the highest this year, according to the latest data from the Commodity Futures Trading Commission.
The Treasury’s unexpected ramp-up in buybacks of long-dated bonds appeared to be an attempt “to manipulate the yields, rather than dealing with the source of why yields are moving higher,” Efstathopoulos said. “Gold now is less focused on yields rising, but why yields are rising.”
The portfolio manager — who sold gold earlier this year, when the metal embarked on its biggest slide in four decades — funded his latest bullion purchases with high-yield bonds, including gilts, along with some cash. He said the underlying factors that drove gold to a record high in late January remained intact, including central bank purchases.
China, for example, added about 20 tons in July, the biggest increase in holdings since October 2023.
This article was provided by Bloomberg News.