BofA’s Hartnett says stay long gold as hedge against U.S. boom and dollar risk

Investing.com -- Money-market and gold funds led inflows last week as investors sought both yield and safety, according to Bank of America.

For the week ended October 22, money-market funds attracted $23.6 billion, bonds $17.2 billion, stocks $14.2 billion, and gold a record $8.7 billion. Crypto funds saw their first outflow in 10 weeks, losing $300 million.

BofA said 2025 is on track for the second-largest annual inflow ever into money markets at $1.1 trillion, while gold is heading for a record $108 billion.

Investment-grade bond funds are also on course for a record $415 billion, with equity and tech funds on track for their third-biggest inflows ever, at $693 billion and $55 billion respectively.

Energy funds logged their biggest weekly inflow since October 2023, at $1.1 billion.

Strategists led by Michael Hartnett said they “stay long gold to hedge U.S. boom, AI bubble, US$ debasement risk, more asset price inflation on Fed put, Trump put, new Gen Z put.”

They noted that despite recent surges, gold remains "structurally under-owned," accounting for just 0.5% of BofA private client assets and 2.4% of institutional portfolios.

"Bulls say decade-to-date for every $100 into stocks, just $4 into gold," Hartnett said. 

The note said the “U.S. boom” continues to fuel optimism in risk assets, with global central banks having cut rates more than 300 times in the past two years despite U.S. nominal GDP rising 11%—a combination Hartnett described as “positioned for booms, bubbles and debasement.”

On emerging markets (EM), BofA said October’s close is “the most important monthly close” for EM equities, as a breakout to new highs would confirm a broader risk-on phase driven by expectations of a U.S.–China trade deal.

However, a failure to break out would be “bearish” and could mark “the end of the risk rally from April tariff lows.”

By region, U.S. equities saw a sixth straight week of inflows at $13.3 billion last week.

Europe resumed inflows at $2 billion, while emerging markets and Japan returned to outflows of $1.5 billion and $200 million, respectively.