US Policy Threats Fuel Shift to Gold From Dollars, Amundi Says

Increasing US isolation from other nations is convincing many investors to cut holdings of dollar assets and switch to gold, according to Europe’s largest money manager Amundi SA.

The transition away from the greenback is also due to the large US deficits and question marks over future Federal Reserve policy, Vincent Mortier , Amundi’s chief investment officer, said in a Bloomberg Television interview.

“We have allocated to gold for the last two years and a half, and I think it can continue, because gold in the long term is a very good protection against debasement and a good way to maintain some purchasing power,” he said.

Gold headed for a seventh day of gains Tuesday, after climbing above $5,000 an ounce for the first time ever on Monday. Bullion has surged 85% over the past 12 months, while Bloomberg’s has fallen 8.5%.

Much of the demand for gold is coming from institutional investors, such as central bankers and sovereign wealth firms, said Mortier of Amundi, which oversees about €2.3 trillion euros ($2.7 trillion) of assets, according to its website.

Trump’s haranguing of traditional allies, including the latest spat with European nations over Greenland, and the president’s persistent tariff threats will have a cost, according to Mortier.

“You cannot bully your allies like this forever,” he said. “There are new alliances that are starting to build. The direction of Europe on Greenland is quite interesting, which shows that under pressure you can find new forms of fightback.”

Canadian Prime Minister Mark Carney last week called for nations to act in tandem in a blunt message at the World Economic Forum in Davos, Switzerland, in which he warned against coercion by great powers.

All of that is compelling global funds to look for new places to store their money.

“The question mark is what do you do when you sell your US dollars?” Mortier said. “The alternative is gold.”