'Bond King' Jeff Gundlach says 'gold will go much higher' as he doubles down on bearish dollar call
(Kitco News) Billionaire "Bond King" Jeff Gundlach reiterated his bearish dollar, adding that gold will eventually climb much higher.
"Ultimately, I think gold will go much higher as the dollar falls and commodities broadly have a further significant leg to the rally that began 15 months ago," he said in a webcast on Tuesday.
However, this is more of a long-term view since Gundlach doesn't see gold making any significant moves in the near future. When discussing the copper-gold ratio, Gundlach noted it should be above 2.5% because of the 10-year yield. But he added that it couldn't get there due to a price-fixing rates market.
This outlook on gold is based on Gundlach's bearish video on the U.S. dollar. "The dollar going down. That's the linchpin to everything, I believe. And so, that's the thing that is the most important," he said.
After trading near the low 90s for the last few years, the U.S. dollar index is at a "critical juncture," he stated. Gundlach is neutral on the U.S. dollar in the short term, but in the long term, he doesn't rule out the index falling below 70.
Gundlach highlighted the U.S. employment shortages problem as he talked about the $500 McDonald's signing bonus.
"You wonder what the terms of that might be. You'd think that maybe people pocket $500 and then go to the business down the street and pocket another $500. You wonder how long you have to work there, but there's clearly a shortage of workers because small and medium-sized businesses still have to compete with the U.S. government stimulus checks," he said.
He also pointed that U.S. consumer spending has helped the Chinese economy reach the largest export-versus-import gap since 1997. "We've really been helping out the Chinese economy," Gundlach said, noting that a lot of the government assistance money is being spent on goods from Asia.
One major shift was Gundlach turning positive on European stocks. "[It] felt really weird. I've been negative on European stocks relative to U.S. stocks since the founding of DoubleLine 12 years ago. Now European stocks have begun outperforming U.S. stocks," he described.
When commenting on inflation, Gundlach asked, "how does anybody know whether it's going to be transitory or not?" He did, however, add that there might be more to the inflation story than just the transitory base effects.
"One thing arguing for transitory is the base effects from a year ago. If we look at the month by month CPI and PPI numbers, though, the base effect narrative gets exploded a little bit because we continue to accelerate not just versus a year ago, but versus three and four months ago," he said.
Gundlach also wondered how the Fed would respond to the CPI data coming in at 5%. "That will be a big question for the market," he said.