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Fund managers bet on gold amid Greek uncertainty

Sentiment towards gold is on the up, as talks between Greece and its euro zone creditors drag on, adding to investor fears of a possible "Grexit" -- or Greek exit from the currency bloc.

Asset managers have turned bullish on the yellow metal this month, with 40 percent of investors polled by Bank of America Merrill Lynch (BofA ML) for its latest fund manager survey predicting the price of gold to rise in 12 months' time.

Read MoreGreece: The final countdown

An employee stacks gold bars onto a cart inside the precious metals refinery plant.
Allessia Pierdomenico | Bloomberg | Getty Images
An employee stacks gold bars onto a cart inside the precious metals refinery plant.

Only 3 percent of the 196 panelists, who run $559 billion of assets, now consider gold to be overvalued, compared to 20 percent as recently as December.

"China's weakening outlook is weighing on global emerging markets equities…but sentiment towards gold is also improving," the survey found.

"Many investors continue to see value in oil, 39 percent regard crude as undervalued, down slightly from January's reading," it added.

Read MoreGold gains ahead of Chinese New Year

Gold halted a three-day rally on Tuesday, falling almost 0.8 percent to $1,221 ahead of Chinese New Year on Friday, giving up gains it had accumulated in the last three sessions amid Greek uncertainty.

Although worries about Greece persist, asset managers remain optimistic on corporate Europe, with its profit outlook at its best since 2009, February's survey showed.

Investors have been adding to their positions in European stocks and trimming their allocation to U.S. equities, with only 6 percent of managers polled overweight on U.S. stocks -- down 18 percentage points on last month.

"Sentiment has gotten ahead of the fundamentals on European equities. It is as if there is not a single bear left. We will need to see a strong recovery very soon to keep the bulls happy," said Manish Kabra, European equity and quantitative strategist at BofA ML.