Investors Are Spending Fresh Billions Hedging Market Mania- Experts

Business Standard Investors are spending fresh billions hedging market mania: Experts

Gold and longer-maturity bonds are getting outsized inflows. Protective equity options are outdrawing speculative contracts, while volatility markets are positioning for fresh disruptions.

Whether it’s a bearish portent of a sell-off to come or prudent hedging after a fierce stock rebound, traders are bolstering their defenses against an end to this vertiginous rally.

Gold and longer-maturity bonds are getting outsized inflows. Protective equity options are outdrawing speculative contracts, while volatility markets are positioning for fresh disruptions.

It comes as signs of froth are emerging. The S&P 500 Index is on the cusp of its best quarter in more than 80 years even as fears of a second coronavirus wave grow. Speculative mania reigns among retail investors, while the likes of JPMorgan Chase & Co. are turning bullish on U.S. stocks.

But for all the fears that Wall Street is running headlong into risk in one of the fastest rebounds ever, hedging demand shows the frenzy is being met with some vigilance.

Yellow Metal Net bullish bets on gold in futures and options have risen for the first time in four weeks, recovering from a one-year low, Commodity Futures Trading Commission data showed on Friday. The SPDR Gold Shares, the world’s biggest exchange-traded fund holding bullion, took in the most in about a year at $1.3 billion on Friday. Overall, gold ETFs boosted their holdings by almost 30 tons, a sign of enduring faith in the defensive asset.

One reason: bulls keep finding their faith rewarded, with the price of bullion edging toward the highest since 2012.