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(Kitco News) Jeffrey Gundlach, CEO of DoubleLine, said gold was hindering this year as the broader commodities index outperforms stocks.
“It’s interesting that gold is actually negative this year. Commodities are very strong. Commodities are up more than stocks this year as a basket. But gold doesn’t seem to be coming out of. its own way. And obviously, the dollar being firmer lately isn’t positive for gold either, “Gundlach told CNBC on Thursday.
Regarding the continued rise in commodities, Gundlach noted that the rally is nearing its peak.
“I guess commodities won’t explode higher. The movement has been so linear and so persistent. The dollar has been moderately firmer over the past few weeks, and that will continue. And that would mean the prices of commodities are likely to be fading right now, ”he said.
But there is a key difference between the short-term and the long-term outlook for the US dollar. “In the short term, the dollar looks firm. In the longer term, the dollar is doomed to failure, ”Gundlach said.
A sharp drop in the dollar is coming in the medium term, added the so-called king of bonds, citing the size of the US deficit.
“Ultimately, the size of our deficits – both the trade deficit, which exploded after the pandemic, and the budget deficit, which is obviously completely out of the ordinary – suggest that in the medium term – I don’t really think this year, exactly, but in the medium term the dollar is going to drop quite significantly, ”Gundlach said. “This will be a very important momentum because one of the things that has helped the bond market, without a doubt, has been foreign buying, as interest rate differentials have favored hedged US bond positions for foreign bond investors. “
Overall, Gundlach is sticking with its stocks, long-term government bonds, gold, and the allocation of its liquidity portfolio.
“I started 25/25/25/25 – stocks, long government bonds, gold and cash. I changed this a few months ago to reduce cash and increase stocks a bit,” did he declare. “This mix is reasonable until we have a clear idea of what will happen with the government’s stimulus measures.”
Gundlach also described the Fed’s stimulus situation as a double-edged sword. “I don’t think the Fed can be a cold turkey when it comes to stimulus, he said. If the stimulus continues, inflation could get worse. If they remove the stimulus, the economy is extremely uncertain. “
On top of that, the Fed stimulus is leading to high consumer behavior befitting China.
Speaking of inflation, Gundlach warned that many themes this year remind him of the 1970s. He added that the Fed would soon start to have trouble explaining inflation as transient.
“They talked about transient as being two or three weeks. And now the transient seems to have turned into six to nine months. And it looks like they’re going to have to expand that definition of transient,” he said. . “But Jay Powell still wishes, hopes and prays that this will go away. I’m not sure why inflation will be transient if this stimulus continues.”
Inflation data has mushroomed in recent months. If this continues for another two months, the Fed will need a reality check, Gundlach added.
“A handful of five percent of the CPI is kind of shocking. And I think a handful of nine percent of the PPI is really shocking. And you know, if we get another two months of that type of data, that will require a reality check, “he said.
The bond market is already anticipating that the Fed is getting more serious about inflation. “The bond market thinks the Fed may need to start doing something to seriously cut back on these bond buying programs and maybe even start raising short-term interest rates,” Gundlach noted.
Speaking of bitcoin, Gundlach said he will not own it at the moment as the cryptocurrency is expected to drop to $ 23,000. At the time of writing this article, bitcoin is trading at $ 31,520.
“Right now the bitcoin chart looks pretty scary. It’s gone down a lot from $ 60,000 to around $ 31,500, and it looks like a huge head and shoulders top,” he said. he declares. “I don’t believe much in head and shoulder tops, but this one looks pretty convincing. Going neutral at $ 23,000 was obviously too early, but I have a feeling you’re going to be able to buy it. below $ 23,000 again. “
Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.
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