--- title: "Gold in turmoil! The world's largest hedge fund warns" type: "News" locale: "en" url: "https://longbridge.com/en/news/261825158.md" description: "The sentiment in the Asia-Pacific stock market is warming up, with Japan's Nikkei 225 index reaching a historic high and South Korea's Kospi index rising. Despite the tense trade situation, the market's optimistic expectations for a Federal Reserve interest rate cut have boosted sentiment. Gold prices have experienced significant fluctuations, with London gold falling from $4,380.89 to $4,237. The world's largest hedge fund, Bridgewater, warned that without retail participation, gold prices above $4,000 may face insufficient demand, emphasizing the critical role of continued accumulation by high-net-worth investors in the West for the gold market" datetime: "2025-10-20T07:21:02.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/261825158.md) - [en](https://longbridge.com/en/news/261825158.md) - [zh-HK](https://longbridge.com/zh-HK/news/261825158.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/261825158.md) | [繁體中文](https://longbridge.com/zh-HK/news/261825158.md) # Gold in turmoil! The world's largest hedge fund warns The sentiment in the Asia-Pacific stock market has warmed today. Japanese stock indices surged and hit record highs, with the Nikkei 225 index breaking the 49,000-point mark for the first time in history. The path for Kato Sanna to become Prime Minister seems to be set. After political negotiations, the path for Kato Sanna, the fiscal expansionist president of the Liberal Democratic Party, to become Japan's next Prime Minister has become clearer, paving the way for the introduction of economic stimulus measures. Taylor Nugent, a senior economist at the National Australia Bank, stated in a report: Other opposition parties seem unlikely to unite in support of another candidate, clearing the way for Kato to become Prime Minister. Previously, there were views suggesting that betting on the "Kato Sanna trade" is essentially equivalent to betting on Japan's re-inflation combination of "stronger fiscal stimulus, industrial support, and moderate monetary policy"—longing Japanese stocks, shorting the yen, and avoiding long durations. The South Korean Kospi index continued to rise after two consecutive days of decline. Despite the tense trade situation, optimistic expectations regarding a possible interest rate cut by the Federal Reserve boosted market sentiment in the region. The South Korean Kospi index has risen 50% so far this year, while the Japanese Nikkei 225 index has increased by 22.53% year-to-date. In the Hong Kong A-share market, major A-share indices rose, and Hong Kong stocks surged, with technology stocks leading the gains. After a sharp rise, gold prices fell sharply, experiencing significant volatility. London gold began to retreat to around $4,237 after reaching a new high of $4,380.89 last Friday. Regarding the future of gold, the world's largest hedge fund Bridgewater has shared its latest views! **Gold experiences significant volatility, Bridgewater's latest views are here** In contrast to the optimistic sentiment shared by major international banks, Bridgewater has provided a relatively unique perspective on gold. Bridgewater, the world's largest hedge fund, warned that if retail participation is lacking, gold prices above $4,000 may face insufficient demand. Hudson Attar, head of Bridgewater's China currency assets, pointed out in an internal interview that the key to the current gold market lies in the sustainability of continued accumulation by high-net-worth investors in the West. Hudson Attar believes that if Western investors continue the substantial allocations seen since September, there is still room for gold prices to rise, but the tail risks present in the market (such as uncontrolled inflation in the U.S.) could change sentiment. He noted that if market uncertainties decrease, such as the end of the U.S. government shutdown, clarity in Japanese politics, and the UK announcing its fiscal budget, investors' demand for gold may pause, making it difficult for the gold market to sustain current price levels. Hudson Attar estimates that global central bank demand for gold purchases may support gold prices between $3,000 and $3,500, but prices above $4,000 may lack sufficient market demand without retail participation. In his view, the current surge in gold prices is large and rapid, occurring during the off-season for physical demand in Asia (such as the Chinese National Day holiday), and future physical demand may adjust. Hudson Attar stated that the rise in gold prices appears more as an "independent market," not closely related to asset allocation shifts driven by currency depreciation, while gold prices have decoupled from Bitcoin, and the outperformance relative to silver exceeds the normal beta coefficient, suggesting that this demand growth may not be sustainable He reminded that market judgments should remain prudent, and we may currently be in the early stages of a larger-scale asset allocation shift. Public information shows that Bridgewater Associates significantly increased its holdings in SPDR Gold Shares in the first quarter of this year, with a holding size of USD 337 million by the end of the second quarter, accounting for 1.36% of its U.S. stock portfolio. There are also continued bullish views on gold. Michael Hsueh, a research analyst at Deutsche Bank, estimated in a recent report that as gold prices rise, gold's share in global "foreign exchange + gold" reserves has climbed from 24% to 30%; meanwhile, the dollar's share in global "foreign exchange + gold" reserves has dropped from 43% to 40%; to match its share, the gold price would need to rise to USD 5,790 per ounce, assuming current holdings remain unchanged. **The most aggressive retail investors are starting to bet heavily!** **Is a new round of long-short battles coming?** As U.S. stock valuations rise, discussions about "U.S. stock bubble" are heating up on global social media. Is a new round of long-short battles upon us? Korean investors, known as some of the most aggressive investors, are actively betting on potential volatility in U.S. stocks. Korean investors have a reputation for being bold in the international market. How obsessed are they with investing? Stock trading in Korea has no age restrictions, and many teenagers choose to enter the market to trade stocks. During the globally sensational GameStop short squeeze, Korean retail investors accounted for nearly 20% of the trading volume. In recent years, Korean investors have also been heavily involved in cryptocurrency trading and U.S. tech stocks, once holding nearly 2% of Tesla's shares, equivalent to about 1% of the total market capitalization of the U.S. stock market. After participating in the speculation of U.S. tech stocks, Korean investors have recently begun to turn their attention to new areas. Data from the Korean Securities Depository shows that the "2x Long VIX Futures ETF" has become a "new favorite" among Korean investors, attracting nearly USD 130 million this year, accounting for 20% of the global inflow into this ETF! This ETF is not an ordinary investment product; it targets the Chicago Board Options Exchange's Volatility Index (VIX) futures and comes with 2x leverage. In simple terms, it amplifies the returns from U.S. stock volatility by two times, betting on a significant "volatility" in U.S. stocks in the near future. Korean investors are using this leveraged VIX investment to magnify the potential returns from future significant fluctuations in U.S. stocks. However, leveraged VIX investments typically involve complex short-term trading processes, and long-term holding may face significant risks. Francis Oh, head of business development for Rex Shares LLC in Asia, pointed out that these leveraged VIX ETFs are used by Korean investors to gain greater profits during panic sell-offs, but small investors in Korea may not fully understand the technical details and risks of these securities. More intense controversies are still brewing. Some market participants have poured cold water on the situation, asserting that these Korean retail investors betting on volatility "will face losses": on one hand, there is a heated global AI race, and on the other hand, the Federal Reserve's easing policies provide support, making a short-term collapse of U.S. stocks unlikely; holding onto leveraged VIX could lead to losses The fermentation of market debates reflects the emerging divergences in the U.S. stock market. After the Trump tariff war in April this year, panic sentiment in the U.S. stock market once peaked, and recent data has shown signs of "panic" again. Previously, the VIX index, which measures market panic sentiment, rose to 28.99, reaching the highest intraday level since late April. This data indicates a certain shift in sentiment in the U.S. stock market, with not only South Korean investors but also other funds beginning to waver. John Roe, head of multi-asset funds at Legal & General, which manages $1.5 trillion in assets, revealed that his team has decided to reduce risk exposure and turned to shorting stocks on Wednesday, citing a growing disconnect between investor positions and fundamentals. **Since October, ETFs have attracted 99.161 billion** **with gold and Hong Kong stocks as the main inflow directions** In the A-share market, ETF funds have been strongly attracting capital since October, focusing on gold and Hong Kong stocks. As of October 17, the net inflow of ETF funds since October has reached 99.161 billion yuan. Among them, equity ETFs contributed 92.457 billion yuan, accounting for over 90%. In terms of specific fund flows, there are 40 ETFs with net inflows exceeding 1 billion yuan within the month. The two major directions favored by funds are gold and the Hang Seng Technology Index. With gold prices soaring, the enthusiasm for allocating funds to gold has increased. As of October 17, five gold ETFs linked to SGE Gold 9999 have seen a total net inflow of 19.993 billion yuan in October. After reaching a new high on October 2, Hong Kong stocks began to correct, and ETF funds went against the trend to buy Hong Kong stocks. Among them, five ETFs tracking the Hang Seng Technology Index attracted 11.481 billion yuan in October. In addition, bank ETFs and securities ETFs attracted over 4 billion yuan; non-ferrous metal ETFs and rare earth ETFs saw net inflows exceeding 3 billion yuan; dividend low volatility ETFs, Sci-Tech 50 ETFs, brokerage ETFs, battery 50 ETFs, chip ETFs, and battery ETFs all saw inflows exceeding 1 billion yuan. 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