Bond King Jeffrey Gundlach: Gold price is done falling
(Kitco News) Gold has been disappointing investors this year, but the precious metal's luck is about to change, at least according to DoubleLine CEO Jeffrey Gundlach.
"Gold went down to $1,681 on Monday on the close. That might be the low in gold for a while," Gundlach said in a webinar.
The DoubleLine CEO turned neutral on gold when it was above $1,800. "Certainly, that looks like it has been the right call," he said.
Gold has really underperformed this year, falling below $1,700 an ounce on Monday. "Gold has really underperformed other froth assets like bitcoin by incredible amounts, almost inconceivable amounts since that peak in gold above $2,000," Gundlach stated.
But at this particular juncture, "gold is very likely to bounce because the selloff has been pretty powerful."
Gold's fair value seems to be around $1,761 an ounce, Gundlach added, which gives the precious metal some room on the upside.
"Long-term gold is pretty interesting. Our model shows that gold is at fair value at $1,761," he said. "We don't think the decline in gold is likely to continue."
At the time of writing, April Comex gold futures were trading at $1,717.30, up 0.02% on the day.
Gundlach pointed out that he is also bullish on commodities and negative on the dollar in the long term.
Inflation was another key topic covered by the webinar, with Gundlach saying that the headline inflation will breach 3% this summer and remain above that level for a few months.
"The Fed chooses to be unconcerned about a period of time with inflation running above 3%," Gundlach said. "In my opinion, not only are they unconcerned, they welcome inflation being higher than interest rates. They like negative interest rates because they know that negative interest rates help to forestall the incredible deficit and unfunded liability problems the United States has."
There is even a chance that inflation could rise to 4%, which would "really spook" the bond market. "One could actually plausibly predict that headline CPI could go over 4% at some point in about four months from now," he added.
On the U.S. Treasury's front, Gundlach noted that the bond market is oversold. "I'd expect a modest or moderate decline in yields on the long-end ... It's pretty overextended sentiment-wise," he said.
Another new call that came out of the webinar was about market volatility, as Gundlach projected for the Cboe Volatility Index (VIX) to hit over 100 during the next big market downturn. The VIX has hit a record high of 82.69 back in March of last year during the selloff triggered by all the COVID-19 lockdowns.
Gundlach added that the stock market has not been more overvalued and reminded investors that the U.S. won't come out of recession until a recovery in both nominal and real GDP.
The DoubleLine CEO ended the webinar with the words: "Cheapest asset in the world right now is farmland."