Wall Street is forced to "surrender": Gold rises too rapidly, 39% of fund managers miss out.

Wall Street has finally recognized the historic high trend set by gold. The continued rise in gold prices this year has caught many professionals off guard. According to the latest fund manager survey from Bank of America Merrill Lynch, as high as 39% of investors did not hold gold, thereby missing out on the profits of this bull market. Previously, Jamie Dimon, CEO of JPMorgan Chase, reluctantly supporting gold became a turning point. Dimon stated, "This is one of the few times in my life where it makes sense to have a small amount of this asset." He also added that he is not a buyer because "it costs 4% to hold it," and he could earn the same returns in the currency market. Dimon predicts that in the current environment, the price of gold could easily rise to $5000 or even $10000. This is one of the rare times in his career that this Wall Street leader has considered gold allocation "semi-rational." For fund managers, allocating a large amount of such assets in investment portfolios is not easy. This precious metal does not generate any income and has no clear fair value measurement standard. According to Alpine Macro data, its total production cost per ounce is about $1500. However, this benchmark data cannot explain why the trading price of this precious metal would reach $4200, or even in some forecasts, rise to $5000 next year. But the price of gold shows no signs of slowing down, and the so-called "currency debasement trade" (betting that central banks will maintain low interest rates and major currencies will depreciate) is becoming a hot topic, so fund managers have no choice but to adapt to this new normal. For example, Wall Street commodity analysts have been constantly revising their forecasts upward, as the price of this metal hits new highs. Bank of America Merrill Lynch currently estimates that by the end of next year, the price of gold will reach $5000 per ounce. The reason for this is extremely simple - investment demand. If investors' purchasing quantity increases by only 14%, the price of gold will reach this level. Now, the U.S. market is catching up, as the liquidity train has arrived. This "gold rush" began three years ago when the Chinese central bank and households significantly increased their gold reserves; now this frenzy has spread to the United States. Ordinary investors have joined this uptrend, with passive funds such as the "SPDR Gold Trust ETF" receiving a large influx of funds and trading volume surging. This year, small individual investors in the United States have become the dominant force in the market. Historically, high valuations no longer predict future corrections for asset categories they choose to invest in. Since August 26 when Trump ordered an attempt to dismiss Federal Reserve Governor Lisa Cook, the price of gold has risen by about 25%. The U.S. Supreme Court has postponed a ruling on the president's attempt to remove Cook from office. She currently remains at the Federal Reserve. For gold, the narrative is more important than any factor. If U.S. households begin to realize that gold is a necessary means to hedge against inflation and dollar depreciation, its price will rise without limits. This is very favorable for gold supporters, as the market size of physical gold traded exchange-traded funds is small compared to U.S. Treasury bonds. According to Goldman Sachs, if 1% of privately held U.S. Treasury bonds flow into the gold market, the price will rise to nearly $5000. This may explain why Dimon said, "In this environment, this metal can easily rise to $5000 or $10000." It is still unknown what actions China will take. The People's Bank of China has raised the reserve requirement ratio for deposits for 11 consecutive months, which is an important factor driving this year's rise in gold prices. There is a view that commodities have their advantages, for example, the Chinese government successfully played a role in trade negotiations with the Trump administration by implementing rare earth export controls. In addition, with a significant increase in exports and current account surplus, the Chinese government still has a large amount of U.S. dollars available for investment. The rapid rise in gold prices may make Wall Street fund managers dizzy. In order to meet customer demand and drive business growth, they may closely follow the market's pace. However, at the same time, they bear the risk of failure, as the bull market of gold is unpredictable.