DoubleLine Capital CEO and founder Jeffrey Gundlach stated on Wednesday, following the Federal Reserve's decision to once again hold interest rates steady, that he would not be surprised if gold falls below $4,000 per ounce before resuming its upward trend. Gundlach, often referred to as the "New Bond King," remarked, "I had previously recommended investors hold assets like the Bloomberg Commodity Index and allocate a small portion directly to gold. But I am not recommending that now. I believe there will be a cheaper entry point." He noted that after a vertical surge from $3,500, gold prices previously peaked around $5,500. Gundlach added that commodities overall have remained strong, driven by the energy sector since the outbreak of conflict in the Middle East. At the time of reporting, gold was trading at $4,543, having gained approximately 5% year-to-date.
Simultaneously, Gundlach believes the bond market is signaling that high inflation will persist longer than previously anticipated. Following the Fed's commentary, the policy-sensitive two-year U.S. Treasury yield climbed about 10 basis points, and federal funds futures traders have now fully priced out the possibility of an interest rate cut in 2026. The 30-year Treasury yield remained stable around 5%. Gundlach stated, "The bond market has begun pricing in expectations that higher inflation will last longer, which we view as entirely reasonable." He predicted that, due to elevated crude oil prices, the headline Consumer Price Index (CPI) could remain around 3% by the end of 2026, with the potential to touch the "4-handle" in the coming months.
Gundlach characterized the Fed's tone as "slightly hawkish due to concerns over inflation not meeting targets," pointing out that Chair Jerome Powell suggested rate cuts would not be considered if the impacts of tariffs and oil price pressures do not subside over the next one or two quarters. Gundlach also observed that, in terms of total returns, nearly all traditional bond sectors have posted negative returns year-to-date, with emerging market local currency bonds being the sole exception. He added that the Bloomberg Commodity Index has been the best-performing traditional asset class this year.
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