Market Analyses by DoubleLine: Gold Shines as the Dollar Weakens

The increasingly heavy debt burden of the USA and the rise in interest expenses threaten to weaken the attractiveness of dollar investments, warns Jeffrey Gundlach of DoubleLine Capital. The experienced bond manager predicts a shift in investor focus away from U.S. Treasuries to alternatives not based on the dollar. Gundlach expressed his skepticism regarding long-term U.S. Treasuries as safe havens in an interview at the Bloomberg Global Credit Forum in Los Angeles. Particularly noteworthy is his comparison to the periods before the Dotcom bubble in 1999 and the financial crisis in 2006 and 2007. He also draws parallels between the current booming private credit market and the CDO market of the 2000s, speaking of potential overinvestment in this sector. While public credit markets have recently outperformed private ones, Gundlach warns of potential forced sales, especially among large institutions that might divest parts of their holdings. These assessments come at a time when the auction for 30-year U.S. Treasuries is in focus. Since its founding in 2009 after a contentious separation from TCW, DoubleLine has steadily gained influence. Despite the volatile market environment, Gundlach's enthusiasm for gold as a reliable investment grows. He sees a paradigm shift where gold, rather than the U.S. dollar, gains importance as a safe haven. He predicts that the gold price could reach further highs and highlights India as a promising long-term investment opportunity. Gundlach cautions that the yields on long-term bonds could continue to rise. Should they reach the 6% mark, the Federal Reserve might intervene with quantitative easing to lower costs. In the meantime, DoubleLine and similar companies have started to focus on shorter-term bonds to minimize interest rate risk. A notable development is that the yields on 30-year U.S. Treasuries recently reached a nearly two-decade high of 5.15%, while short-term rates have fallen. These shifts signal significant structural changes in the global markets.