(Kitco News) - DoubleLine Capital CEO and billionaire bond investor Jeffrey Gundlach doubled down on his recession call and said he still liked gold as 'real money' despite the precious metal's trouble staying above $2,000 an ounce.
Looking at the U.S. economic leading indicators, as measured by the Conference Board, the outlook seems "absolutely full-on recessionary," Gundlach said during a webcast titled 'Dust in the Crevices.'
"The momentum of leading indicators has not improved," Gundlach said Tuesday. "It's pretty clear that we have the look of soon to be at the front end of a recession."
Gundlach noted that 30% of his portfolio is in stocks, 60% in bonds, and 10% in real assets.
"The real asset I like is gold, which has gone up this year, but has a very hard time staying above $2,000," Gundlach said.
After testing record highs and rising to $2,085 an ounce in May, gold has sold off and is now testing support at $1,960 an ounce.
"I like gold just because it is real money," Gundlach said. "But I don't like commodities. I haven't liked them for a year just because the economy is weakening, and we are probably heading into a recession sooner rather than later, and commodity prices won't go up during a recession."
However, Gundlach is "less bullish" on gold compared to earlier this year because it hit a triple top.
"It gets above $2,000 and stays there for a very short period of time. And now we are back down to $1,965. It seems like gold has been consolidating," he said. "It has certainly done well over the past year — going from $1,600 up to nearly $2,000 now. I am less bullish on gold because of this triple top concept, but I still own it."
At the time of writing, August Comex gold futures were trading at $1,960.40, down 1.06% on the day.
When commenting on the sticky inflation, Gundlach said the Federal Reserve has "screwed up" by raising rates a year too late.
"That is why inflation rose as much as it did and is sticky," he said. "Should have raised rates by 200 basis points when they started. They unleashed this conundrum … If it raised rates sooner and faster … might not have had these failures in the banking system."
The good news for gold is that Gundlach sees the U.S. dollar index trending lower in the long term, especially if the U.S. fails to deal with the deficit problem.
The budget deficit must be addressed in the next few years, and it will likely become a political issue in the 2024 presidential campaign.
"Fiscal responses to recessions have gotten out of control," Gundlach pointed out. "It was fine to run a deficit when rates are non-existent. [But] now we have the budget deficit increasing and Fed raising rates for a while now … With interest rate going up this much, it will swallow tax receipts in the next few years if we stay on this track."
By Anna Golubova
June 7, 2023
