Bill Gross Warns: Gold's Rally May Be Overblown, Investors Should Hold Off
Bill Gross, the legendary bond investor, is cautioning investors to hold off on buying gold, despite its recent surge. Gross, co-founder of Pimco, highlights the market's anxiety over regional banks' loan books and the potential impact on stocks and bonds. He also points out the soaring debt among developed economies, including the U.S., which has made investors wary of global currencies, even safe havens like the dollar.
The 'debasement trade' is fueling a surge in precious metals and bitcoin, as investors bet on governments allowing inflation to rise to ease debt burdens. Gold prices have skyrocketed over 50% this year, doubling since early 2024, while silver, platinum, and palladium have seen even more significant gains. Market veteran Ed Yardeni predicts gold could reach $10,000 per ounce by the end of the decade if its current pace continues.
However, Gross suggests that gold's recent rally may be overextended. Prices fell more than 2% on Friday after hitting a record high above $4,300. He advises, 'Gold has become a momentum/meme asset. If you want to own it, wait awhile.' Capital Economics' economist Hamad Hussain agrees, noting that 'FOMO' is creeping into the gold trade, making it challenging to value objectively.
On the bullish side, Hussain cites Fed rate cuts, geopolitical uncertainty, and fiscal sustainability concerns. Yet, he also observes that the recent gold rally coincided with a stable dollar and higher inflation-protected bond yields, indicating market exuberance. Despite this, Hussain predicts that gold prices will likely continue to rise in nominal terms over the next couple of years.
