Gold Price Chart Looks 'About To Break Higher' - Bond King Jeffrey Gundlach
The gold price chart is going to break higher, says famed investor and “Bond King” Jeffrey Gundlach, who believes that commodities are one of the best buys in 2018.
“The gold chart looks a lot like the commodity chart, like it’s pacing out, about to break higher. And with the dollar getting weaker, I think you stay with that systematic positioning. I’ve been recommending gold for a couple of years,” DoubleLine Capital CEO Gundlach said during Tuesday’s webcast dedicated to discussing DoubleLine Strategic Commodity Fund.
Gold pushed to 1.5-year highs last week, mainly led by weak U.S. dollar. Prices have been consolidating this week, with spot gold on Kitco.com last trading at $1,338.60, up 0.04% on the day.
Commodities are very cheap right now and should not be avoided, Gundlach pointed out.
“A lot of people think that commodity prices shouldn’t go up late cycle because the Federal Reserve is tightening, but, exactly the opposite is true,” he said.
Some of the main reasons to invest in commodities include diversification and hedging against inflation, Gundlach said in one of the presented slides.
“[Commodities’] potential low-to-uncorrelated returns source to traditional asset classes,” he said. “Physical assets have historically tended to move in line with broad inflation measures.”
When analyzing the Bloomberg Commodity index, it is clear that it bottomed in early 2016. But, the rally since then “has not been puny” and it looks like it will continue to break out, according to Gundlach. “There is lots of gas left in commodities versus stocks’ tank,” he said.
Weak U.S. dollar is projected to boost commodity prices, including that of gold.
“Dollar cycles are persistent and fairly predictable . . . We had a big down year in 2017, which was against all consensus forecast. And in 2018, the dollar is off to a bad start. And usually when you have a bad year, it is followed by one or two more bad years,” Gundlach noted.
“For that reason, not only is there demand for commodities with a strong global economy but, with a falling dollar, that is just another push for higher commodity prices,” he added.
This presentation comes after Gundlach told CNBC in December that his highest conviction idea for 2018 was commodities.
Deputy chief investment officer of DoubleLine, Jeffrey Sherman, also spoke in support of buying commodities, noting that the timing to reassess the commodity asset is a “good one.”
“It has been represented, under-owned and under-loved,” Sherman said during the webcast.