Gundlach said hold gold
Jeffrey Gundlach repeatedly said in his recent interview with CNBC that investors should focus on gold and gold miners, and that this safe-haven asset is the best alternative to Treasuries in the current market environment. According to Gundlach, the world market will face a serious crisis, as there are huge uncertainties across the globe (VEU) (VT) (ACWI).
Over the past several years, volatility in the global equity market, which is quickly increasing, has suggested that the risk-to-return ratio is becoming negative. As a safe-haven asset, gold rises in value when international turmoil starts.
How gold correlates with the S&P 500 Index
After the subprime crisis, gold gained about 145% from its September 2008 lows to its July 2011 highs. Since July 2011, the S&P 500 Index has risen by about 62%, touching a high of 2,130 in July 2015.
During the same period, gold has fallen by about 92%. This shows that in the four years from July 2011 to July 2015, the S&P 500 Index (SPY) had a negative correlation factor of 0.89 with the SPDR Gold Shares ETF (GLD).
Another point of view
Billionaire investor George Soros also announced in April 2016 that gold was the only asset that could outperform in the current market environment. Soros Fund Management’s portfolio is heavily tilted toward gold and gold miners. Barrick Gold (ABX) is Soros Fund Management’s top holding. It constituted 13.1% of the company’s portfolio in 1Q16.
ABX is the biggest gold producer in the world. According to an institutional ownership report, Soros Fund Management is the eighth-largest investor in ABX, holding about 19.4 million shares worth $264 million. The first-largest investor in ABX is VanEck Associates with 49.7 million shares.
Gundlach’s largest holdings
In 2Q16, Gundlach’s DoubleLine Capital’s largest holdings included the DoubleLine Global Bond-I (DBLGX) and the BlackRock LIQ FDS Fed Fund-IN (TFDXX), which constituted 20.4% and 15.8% of its portfolio, respectively.
However, in his recent interview, Gundlach said that his company continues to hold gold and gold miner stocks. He also said that gold prices would touch $1,400 per ounce in the near future.
For more insight, you may be interested in reading Jeffrey Gundlach Explains Why the US Market Is ‘Dead Money.’