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America’s ultra-wealthy are hoarding cash over uncertainty about the future of markets

Wealthy investors are continuing to hoard cash amid uncertainty in the pandemic, and one asset manager says that gold prices are in a bubble.

Although markets continue to surge, with the S&P 500 and Nasdaq hitting new all-time highs this week, members of the ultra-wealthy Tiger 21 club are upping their cash holdings at a record pace.

The club, whose participants typically have more than $100 million in assets, said Thursday that its members have raised their cash holdings to 19 percent of their total assets, according to Bloomberg Quint.

That’s up from about 12 percent since the start of the pandemic, and the fastest change in asset allocation Tiger 21 ever has seen, according to Michael Sonnenfeldt, chairman of the club. 

About a quarter of the group’s 800 members now expect the pandemic crisis to continue until the end of next June, the group said. 

‘In trying to build resources prudently, members have gained liquidity and will not immediately reinvest in those areas in order to keep and build cash to weather this storm,’ Sonnenfeldt said. 

Meanwhile, gold has seen a surge in investor interest as a hedge against inflation.

Though many believe that gold still has higher to climb after falling off of record highs earlier this month, Carillon Tower Advisers portfolio specialist Matt Orton believes the precious metal is in a bubble.

The flow of funds into gold ‘shows how much enthusiasm and/or speculation has been going into the gold complex,’ Orton told Financial Advisor Magazine. 

‘Everyone talks about the bubble in technology stocks,’ but the tech sector is ‘rising because a lot of these companies have been able to increase their market shares during Covid,’ Orton said. 

Gold’s rally, on the other hand, could ‘completely derail’ once risk factors driving investors to safe havens ease, including lower rates and the weaker U.S. dollar, he said.

Gold hit an all-time high earlier this month, but have since eased off.

The price of gold dropped more than 1 percent on Thursday, after the Federal Reserve said it would roll out an aggressive new strategy that aims to boost employment and allow inflation to run a bit faster for longer than in the past. 

Fed Chair Jerome Powell gave a highly anticipated speech, where he essentially said the Fed may continue efforts to prop up the economy even if inflation rises above its target level of 2%, as long as it had been weak before then.

Powell’s remarks on achieving full employment, one of the Fed’s dual mandates, came as new data suggested the labor market recovery was stalling as the COVID-19 pandemic drags on and financial aid from the government dries up.

The number of Americans filing new claims for unemployment benefits hovered around 1 million last week, while the U.S. economy suffered its sharpest contraction in at least 73 years in the second quarter, two government entities said.  

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