Gold and gold ETFs have had a challenging time in 2021, continuing their from fall last summer when the precious metal reached just under $2100 an ounce. But these assets metal may be on a new path, at least according to DoubleLine CEO Jeffrey Gundlach.
“Gold went down to $1,681 on Monday on the close. That might be the low in gold for a while,” Gundlach said in a webinar.
The DoubleLine CEO turned neutral on gold when it was above $1,800. “Certainly, that looks like it has been the right call,” he said.
Since dropping below $1675 on Monday, gold has rallied to $1721, for a nearly 3% gain in just a few days. The move has helped gold ETFs like the SPDR Gold Shares (GLD) to shine too.
Will Underperformance Lead to Upside?
Gold has seriously underperformed this year, falling below $1,700 an ounce on Monday. “Gold has really underperformed other froth assets like bitcoin by incredible amounts, almost inconceivable amounts since that peak in gold above $2,000,” Gundlach stated.
But Gundlach sees more upside for the precious metal, stating that “gold is very likely to bounce because the selloff has been pretty powerful.”
Gundlach feels gold is currently undervalued, and should be trading near at least the mid $1700’s as a start.
“Long-term gold is pretty interesting. Our model shows that gold is at fair value at $1,761,” he said. “We don’t think the decline in gold is likely to continue.”
With interest rates spiking recently, inflation is another factor that could help precious metals climb, according to Gundlach and a number of other analysts.
“The Fed chooses to be unconcerned about a period of time with inflation running above 3%,” Gundlach said. “In my opinion, not only are they unconcerned, they welcome inflation being higher than interest rates. They like negative interest rates because they know that negative interest rates help to forestall the incredible deficit and unfunded liability problems the United States has.”
Gundlach even sees inflation hitting 4%, which he said would ‘really spook’ the bond market. “One could actually plausibly predict that headline CPI could go over 4% at some point in about four months from now,” he added.
Investors looking to trade gold using ETFs can also consider the iShares Gold Trust (IAU). Aberdeen also has quite a collection of metals ETFs, including those focused on gold. Aberdeen’s suite includes the Aberdeen Standard Gold ETF Trust (SGOL), which comes with a 0.17% expense ratio, as well as the Aberdeen Standard Physical Precious Metals Basket Shares (NYSEArca: GLTR), which has a 0.60% expense ratio, and offers a cornucopia of metals including gold, silver, platinum, and palladium.
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