The “explosive, potential energy” of a huge “head-and-shoulders bottom” base is signalling a $1,000 move higher in gold prices, Jeffrey Gundlach, the founder of DoubleLine Capital, said last week at a New York event, reports Reuters. “Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good,” he said, referring to patterns that analysts see as bullish. “I’m not predicting it… I’m letting the market prove itself.”
The “Bond King” also argued that US Treasuries were “not attractive” despite rising yields, as various economic indicators suggest that US inflation is set to rise, which would hurt prices of government bonds (thus driving yields higher).
Meanwhile, the Federal Reserve, under new chairman Jerome Powell, will be less sensitive to panicky stockmarket movements, Gundlach said. “The Fed is not going to bail out the market – unless there is a big problem.” Concerns over privacy have led to more talk of regulating social-media companies, which could burst the bubble in US stocks (see main story), Gundlach believes. But he is bullish on commodities in general.
He reckons the SPDR S&P Oil & Gas Exploration and Production exchange-traded fund (ETF) in particular is worth a look – it has not yet received the full benefit of the crude-oil rally, he told CNBC. “If you look historically at the energy sector versus the S&P 500, not surprisingly it’s correlated with movements in oil. That hasn’t happened this time, and I think there’s a catch-up there.”