Gundlach On Gold: "Something Big Is Happening... It's Getting Exciting"

Picking up where DoubleLine CEO Jeff Gundlach left off yesterday with his Ira Sohn recommendation, which as a reminder was to short Facebook on concerns of regulatory crackdown and go long commodities ahead of a late-cycle inflationary boom, on Tuesday Gundlach spoke at an event for DoubleLine clients and reiterated his late-cycle skepticism, warning that treasuries are still "not attractive" even though the benchmark 10Y yield briefly crossed the key 3% threshold earlier in the day.

The bond king said he is in no rush to buy, well, bonds, because he expects that, based on recent Core CPI prints and the NY Fed underlying inflation gauge, that US inflation will go even higher, sending Treasury prices lower. The fund manager said some indicators are suggesting 3% inflation, and noted that while it might not get there, "something higher than the current rate is sensible."

Quoted by Reuters, Gundlach said the Fed’s "quantitative tightening", which as we described earlier today is already taking the high-grade corporate market by storm where "cash-rich" companies haven't issued a single bond YTD, was a factor in rising Treasury yields.

Furthermore, picking up on another previously covered topic, namely the recent surge in USD funding costs, Gundlach warned that the rising yields will continue as foreigners will be averse to purchasing U.S. Tsys because of hedging costs which have made the US 30Y Treasury the least economical of all govt bonds.

Still, the DoubleLine CEO said he has little conviction the 10Y will break hard above the 3% level:

"Maybe this level will hold on the 10-year. I’m not in that camp, but my conviction is low. My conviction on breaking above 3 is low. I don’t think you need conviction - let the market prove your opinion."

More curiously, unlike a growing chorus on Wall Street, and even the market itself where forward OIS curves have already inverted, Gundlach said that he does not think the yield curve will invert before the next recession. This likely goes to Gundlach's thesis, which he proposed in January, that in the next recession we won't see a bid for safety out of stocks and into bonds. In other words "we won't see a bond market rally."

If so, he is right: there would be no inversion; there would be just an epic cross-asset crash, that incidentally will blow up all risk-parity funds in the process.

Which leads us to the final two points.

First, Gundlach said he thinks that Fed chair Jerome Powell is "not going to bail out the market." Here he may be referring to what Zero Hedge first observed in January, when in the recently declassified 2012 FOMC transcripts, we found the following gem:

[W]hen it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.

Second, Gundlach said that the next big move will likely be in gold prices which have broken their downtrend line, and are on the verge of breaking out to the upside. "It’s getting almost exciting...  something big is happening,” he said cryptically.

He then revealed his target, saying that based on classic chart reading, an "explosive, potential energy" of a huge "head-and-shoulders bottom" base was signaling a move of $1,000 in gold prices, and added that "Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good."

Comments

SILVERGEDDON Tue, 04/24/2018 - 18:50 Permalink

BTFD, HEDGIES. Old school old line. 

About the time Million Dollar Bonus was claiming it only took five bucks to dig it out of the ground. 

And Robot Trader was bragging about being a fucking genius. 

Plus, tmosley was pimping his blow off top book for all to hear. 

Silver Bears commemorative video will be out shortly. 

Good times. 

Mr. Universe BaBaBouy Tue, 04/24/2018 - 21:36 Permalink

It's not really mysterious, it's already baked into the cake. Gold and silver as money is only for Governments and Bankers to control. As long as they stand it won't matter. When they start to fall, fugetaboutit, all private holdings will be illegal. So sure after the collapse, big value, before and during? Try to hang on to it.

In reply to by BaBaBouy

silverer Mr. Universe Wed, 04/25/2018 - 00:26 Permalink

Well, if you expect total lawlessness, try to hold onto your car or house, for that matter. You bank accounts won't help, they are already the property of the bank when you deposit there, according to the Dodd-Frank legislation. So I don't understand how you can say a lawless government controls your gold, if it is in your possession? I can walk to a neighbor's house and exchange gold or silver or something else of value if we both agree on an exchange. But if the country is in collapse, I sure don't want your debt instrument, the US dollar. It's already technically worthless, and that is what the banks and government already control 100%. Better come up with valuable barter: food, medical supplies, clothes, propane, whatever.

In reply to by Mr. Universe

Mr. Universe silverer Wed, 04/25/2018 - 01:30 Permalink

I never said that.

So I don't understand how you can say a lawless government controls your gold, if it is in your possession?

More of what I'm talking about is if you think you are going to cash in on a meteoric rise in PM's as things fall apart. They won't allow that and if they think they can take it away they can try.  While those with a handle on reality know that gold and silver can be used as a means of exchange, most people do not. Check out the videos of people taking a candy bar over silver. They have no clue, you would be better off to store up something millennials really value, like Avacado toast.

 

In reply to by silverer

CJgipper eishund Wed, 04/25/2018 - 10:19 Permalink

Bitcoin is based on relationships between human beings, just like the services mentioned above.  If two people agree that 1 bitcoin is worth painting your house, then it is.  Bitcoin is just a marker for that relational exchange because those two people agree that it is.  Just like every other piece of money on earth, BItcoin is a marker of relational power, the power to have someone else do something for you, whether that's get pavement for your driveway, wash your car, do your accounting, or give you a gun.  It's all just a relational power marker; that's all money is.

In reply to by eishund

Memedada silverer Wed, 04/25/2018 - 07:00 Permalink

Cryptology – that each BTC is unique, divisible, cannot be copied and all transactions (prior, present and future) of each BTC is registered on the blockchain. BTC/crypto-currencies could be disruptive.

What I fail to understand about BTC (and crypto-currencies) is how they’ll challenge the existing world order of banking rule? The crypto-markets are small (compared to other markets: oil, weapons, fiat, bonds, indexes etc.) and are easily cornered/controlled by Whales (i.e. banking actors) – the crypto-markets look more like pump and dump schemes than actual viable new transactions mechanism that can challenge the banking-sector. Based on utility the crypto-sphere is full of promises but lack any results – apart from speculative results (some gaining fortunes – in fiat – and other losing them).

In reply to by silverer

Mementoil el buitre Tue, 04/24/2018 - 22:23 Permalink

That is a common misconception.
TA shows you where and when the buyers outbid the sellers or vice versa. If there is manipulation, it will reflect that as well. And if the charts are indicating a breakout, it means that the manipulators are losing, that they are dumping all they have at the market and the buying pressure is stronger.
 

No manipulation can last forever.

In reply to by el buitre

bobsmith5 Mr Poopra Wed, 04/25/2018 - 10:50 Permalink

Yes, and they seem to do it right on time for options expiry week at the end of every month where the price gets smashed almost every time.  Then next week we have the BLS Jobs report another favorite time for the cabal to smash again if precious metals dare to raise it's head.  And then, here is the biggie.  The FED meets for two days and it's virtually assured pm's will not be going up until after they make their statement on Wednesday.

For silver we remain in the lower part of a 10 year channel that ranges from 15 to 20 dollars just in time for options expiry.  I see absolutely no sign that silver is about to break out of this extremely tight trading range.  There would have to be a sustained cataclysmic failure in the global monetary system before the central banks and their computers stop the massive fraudulent paper suppression/manipulation. 

On top of all the above we are about to enter the yearly summer doldrums where pm's the majority of the time once again get hammered to their guaranteed seasonal lows.

When will these stupid prognosticators ever learn the real reasons for prices and predict accordingly?

In reply to by Mr Poopra