‘Bond King’ predicts gold surge
US billionaire Jeff Gundlach criticises manner of Fed’s rate cut and says price of safe-haven yellow metal will continue to rise
A leading figure in the US bond market has predicted that gold will gain significantly amid the ongoing uncertainty caused by the Covid-19 virus.
Jeff Gundlach, the founder of DoubleLine Capital which currently has $148bn in assets under management, told CNBC : “The dollar getting weaker seems to be a policy. And the Fed cutting rates, slashing rates is clearly going to be dollar negative. And that means that gold is going to go higher.”
With global markets tumbling and the Federal Reserve undertaking the largest interest rate cut since the global financial crisis of 2008, investors have flocked to the traditional safe-haven asset.
Such activity could continue and even accelerate the yellow metal’s bull run. The price of gold has increased by more than 42.8 per cent in the past five years, but 6.47 per cent in the past month alone.
At the time of writing spot gold has gained 1.21 per cent to stand at $1,686.58 per troy ounce.
Although Gundlach recognised the need for a rate cut, he criticised the Fed for taking “a victory lap, talking about how they had finally reached a stable place in policy and that they could be on hold for the foreseeable future. Maybe even the entire world.”
The US billionaire criticised the central bank’s “hubris” and stated that far from reassuring markets, its manner of cutting rates signalled “panic”. While Gundlach predicted the Fed would cut all the way down to zero, he dismissed any suggestion that the bank could go further, stating: “I think Jay Powell understands that negative rates are fatal to the global financial system. If we go to negative rates, there will be capital destruction en masse.”
American, Asian and European markets are tumbling despite injections of stimulus from multiple central banks. And with the White House now admitting that the US does not have enough coronavirus testing kits, it would seem that investors are increasingly coming round to Gundlach’s way of thinking and resorting to safe-haven assets.
He stated: “The President and the physicians, on top of this coronavirus situation, are saying that they might have a vaccine in like a year, year-and-a-half. Nobody knows what is happening here. And so caution is appropriate.”
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