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Data: FactSet; Chart: Axios Visuals

Wealthy clients are increasingly being told by financial advisers to buy gold, betting the Fed's binge of bond buying and an overbought stock market will soon push the precious metal's price up — potentially to its highest ever.

What's happening: A new report from Reuters surveying nine private banks that collectively handle around $6 trillion in assets for the world’s ultra-rich, found they had advised clients to increase their allocation to gold.

  • All of them said they expected gold prices to end the year higher than they are now.

What they're saying: UBS predicts gold will hit $1,800 by year-end in its base-case scenario and could even touch a record high of $2,000 in the event of a second wave of novel coronavirus infections, Reuters' Brenna Hughes Neghaiwi and Simon Jessop report.

  • “With the recent equity rally, people have become more nervous. People are actively seeking out portfolio hedges that might perform well in a range of scenarios,” Kiran Ganesh from UBS’ chief investment office said in the article.
  • Morgan Stanley added a 5% position to commodities including gold in all its models at the end of March.

Between the lines: Gold has been trading in a tight range since April, despite a breakout in the stock market. That could change if wealthy investors begin to make significant moves into gold.

  • "The boost in demand could be a self-fulfilling prophecy for the metal’s price, as any shift in allocation from bond and equity markets, estimated at up to a combined $200 trillion, has a much larger impact on the smaller gold market, estimated at less than $5 trillion," the article notes.

Go deeper

Felix Salmon, author of Capital
Sep 24, 2020 - Economy & Business

Equity outflows speed up

Data: Investment Company Institute; Chart: Axios Visuals

One paradox of the recent bull-market run is that it has taken place in the face of consistent selling by investors in ETFs and mutual funds.

The big picture: Monthly flows from actively-managed stock-market funds have been negative for years, and while flows into passively-managed funds have been positive, they have generally been smaller.

10 hours ago - World

Maximum pressure campaign escalates with Fakhrizadeh killing

Photo: Fars News Agency via AP

The assassination of Mohsen Fakhrizadeh, the architect of Iran’s military nuclear program, is a new height in the maximum pressure campaign led by the Trump administration and the Netanyahu government against Iran.

Why it matters: It exceeds the capture of the Iranian nuclear archives by the Mossad, and the sabotage in the advanced centrifuge facility in Natanz.

Scoop: Biden weighs retired General Lloyd Austin for Pentagon chief

Lloyd Austin testifying before Congress in 2015. Photo: Chip Somodevilla/Getty Images

Joe Biden is considering retired four-star General Lloyd Austin as his nominee for defense secretary, adding him to a shortlist that includes Jeh Johnson, Tammy Duckworth and Michele Flournoy, two sources with direct knowledge of the decision-making tell Axios.

Why it matters: A nominee for Pentagon chief was noticeably absent when the president-elect rolled out his national security team Tuesday. Flournoy had been widely seen as the likely pick, but Axios is told other factors — race, experience, Biden's comfort level — have come into play.