BofA's weekly flow show indicates investor move out of gold into equities

March 12, 2021

New York (Mar 12)  Investors moved $31.5 billion into equities while taking $1.8 billion out of gold and $15.4 billion out of bonds according to the BofA flow show. So at least gold was not impacted as much as bonds but in relative terms, it could be challenged.

This week we have seen the DAX, Dow and S&P post impressive gains while the FTSE 100 and Nasdaq continue to lag behind. Gold has been a casualty of this move and recently has been flirting with the $1700/oz level.

There was a spike in bonds recently after the flow continued to move out of tech stocks into bonds. One big issue is the fact that money markets are pricing in hikes in the Federal Reserve interest rates in the coming years. This could be due to the fact that analysts and traders feel stimulus cannot get much higher than it has done during the pandemic. Fed's Powell and MPC members have said that they will not raise interest rates until the US reaches full employment (or pre-pandemic level). This indicates the market believes that this could happen (rate rises) in a few years, has the market got ahead of itself?.

The ECB has now moved to address the situation of the rise in yields and announced that they will increase the amount of front focused purchases in the coming quarter.

BofA said in the report "We believe 2020 marked a secular low point for inflation and rates,". So, is the only way up?


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