Investors adopted a risk-off mentality in Q2, according to CFA UK’s Valuations Index, with gold deemed to be offering its best value in over six years.
In the survey, which is open to all 11,600 members of CFA UK, gold was seen to be the best value asset class for the second consecutive quarter, with 25.9% of respondents considering it to be undervalued and 53.6% calling it fair value.
Overall, gold was seen as better value in Q2 2018 than ever before in the Valuations Index, which began in Q1 2012.
The price of gold bullion has fallen this year from $1,305 per ounce on 1 January to $1,211 as of 28 August.
Investors’ perceptions of government bonds have also improved over the quarter, with 76.2% of respondents believing they are overvalued, down from 80.3% in Q1.
The number viewing the asset class as undervalued rose slightly from 5.3% to 6.6%.
Meanwhile, there was little change in investors’ outlook for developed market equities, with 63.9% describing them as overvalued.
Will Goodhart, chief executive of CFA UK, said the survey results suggest “an overall decrease in risk appetite among investors”.
“That gold in particular is now seen as better value speaks to investors’ anxiety about valuations in both equity and fixed income markets. Considered a safe haven and inflation hedge, gold may be a popular choice throughout 2018.”
In contrast, the number of respondents who believe emerging market equities to be overvalued has increased from 27% to 31% since Q1, while the number who deemed them fair value fell from 34.3% to 27.38% over the quarter, which the report said was “the second most bearish observation of the asset class since the Valuations Index began”.
However, the number of investors who believe the asset class is undervalued rose from 38.6% to 43.7% over the quarter.
Perceptions of corporate bond overvaluation also remain high, with 78.6% of respondents perceiving the asset class to be overvalued: a marginal increase on Q1.
At 1.96%, the yield is currently its highest since Q1 2016, according to CFA UK.
Goodhart added: “Respondents’ confidence in emerging market equities has declined, and investors are turning towards government bonds and gold.”
This is reproduced from Investment Week; all views are from the publication. This originally appeared online on 3 September 2018.