$XAU, $GLD, $USD
Money manager, Jeffrey Gundlach predicts that gold’s price will continue North along with the run up in negative-yielding bonds.
“At this point, I think the way to think about it is, as long as the volume of negative interest rate bonds outstanding increases, it’s quite likely that gold moves higher in a similar vein,” the CEO of DoubleLine Capital told reporters Thursday.
Mr. Gundlach, who oversees more than $130-B in assets under management, also blames global central banks for what he calls “increasingly negative interest rate manipulation.”
“We are now, I think it’s today or yesterday over $15 trillion of global debt is at a negative yield. And the U.S. bond market is being dragged to lower yields by a combination of the race to ever more negative yields in parts of the developed world, and by weak economic data,” he said.
As negative-yielding bonds moved from $10 to 15% in April and May, gold has moved up 16+%.
“It makes all the sense in the world,” he said. “It’s one thing when bonds yield negative a basis point. That’s painful. This amount of pain isn’t really excruciating.”
“But now that you’re getting into some more significant negative yields, it’s not surprising that people might want to buy things that have a higher yield than bonds,” he added. “With the yield of 0, gold has a higher yield than bonds. And if you store the gold, you now have a lower cost of carry on gold than you have on 10-year bunds.”
Meanwhile, gold edged down Thursday as equities markets recovered, the USD strengthened and traders locked in profits after bullion surged past $1,500 to a more than 6-year highs in the Wednesday’s session, Reuters reported.
- Spot gold was down 0.2% at $1,498.45 oz, as of 01:41 p.m. EDT (1741 GMT),
- US gold futures settled down 0.7% at $1,509.50 oz.
The metal has risen more than 16% YTD, and about $100 over the past week, in a run propelled by trade tensions between Washington and Beijing, falling bond yields and an increasingly dovish shift in policy by global central banks.
The bull run in gold is not over and the market is seeing a natural consolidation.
On the technical front, spot gold may gain further to $1,524, as it has cleared a resistance at $1,497 oz according to my work.
Gold has been one of the chief beneficiaries of the turmoil in global financial markets as Washington and Beijing dispute over trade
“Gold is serving its traditional role as a safe-haven asset,” said the executive director for commodities and foreign exchange at UBS Group AG’s wealth management unit. Under the bank’s risk case, marked by a further escalation of the trade fight, prices could go as high as $1,600, he said.