Fidelity Manager Sees Gold Opportunity Amid Fed Credibility Crisis

Fidelity International portfolio manager George Efstathopoulos has rebuilt his gold position after earlier this year dumping it in anticipation of a sharp downturn. However, he now sees an opportunity to buy back in due to the Federal Reserve's loss of credibility.

Efstathopoulos believes that the Fed's recent actions, including its July meeting and the US Treasury's intervention in the bond market last week, are attempts to control yields rather than address the underlying issue. This lack of credibility and policy uncertainty has led him to increase his gold holdings, reaching a 5% cap on the trade.

The positioning data supports this move, with hedge funds' net-long position in gold reaching a 2026 high for the week ended Aug. 18. Additionally, China's addition of roughly 20 tons to its gold reserves in July marks the largest monthly addition since October 2023.