Should You Follow Gundlach, Jones, and Druckenmiller into Gold?


Jun. 14 2019, Updated 1:48 p.m. ET

Jeffrey Gundlach likes gold

During an investor webcast on June 13, Jeffrey Gundlach said, “I am certainly long gold.” His conviction is based on his expectation that the US dollar (UUP) will finish the year lower. This month, the dollar has fallen ~1%. Since gold is dollar-denominated, gold and the US dollar are inversely related, and the dollar’s fall tends to boost gold. Gundlach also sees a 40%–45% chance of a recession in the next six months and a 65% chance in the next year.

The revival of US-China trade tensions has increased investors’ fears of a recession along with the odds of a Fed rate cut. Lower interest rates are conducive to gold demand, as gold doesn’t yield anything in terms of regular income.

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Jones and Druckenmiller recommend gold

Billionaire investor Paul Tudor Jones spoke to Bloomberg on June 12 and shared his views regarding Fed rate cuts, the recession, and his favorite trades in this environment. In the current environment, where Fed rate cuts are expected, Jones’s favorite pick in the next 12–24 months is gold. Jones thinks that if gold hits $1,400 per ounce, it will quickly move to $1,700. He said, “It has everything going for it.”

In Druckenmiller Suggests These Two Trades to Hedge against Meltdown, we wrote that Stanley Druckenmiller had dumped his other investments and piled into Treasuries (TLT) after President Donald Trump’s tweet on May 5. He said that while Treasuries might have become less interesting after their recent rally, they’re “the best game in town” if the economy deteriorates. He also likes gold (GLD) in this environment.

Gold and gold ETFs

Due to increasing geopolitical tensions, weaker economic numbers, a falling US dollar, and rising Fed rate cut odds, gold and miners have been on an uptrend. In June alone, the SPDR Gold Trust ETF (GLD) has gained 2.7%, and the Junior Gold Miners Bull 3X ETF (JNUG) and the Direxion Daily Gold Miners Index ETF (NUGT)—leveraged gold ETFs—have gained an impressive 18.5% and 22.8%, respectively. Among major gold equities, IAMGOLD (IAG), Barrick Gold (GOLD), and Kinross Gold (KGC) have gained 14.7%, 11.6%, and 9.2%, respectively.

Read A Perfect Storm for Gold: All Macro Drivers Align for more on gold’s outlook.


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