Gundlach's Gold 'Insurance' Hedges Dollar's Decline

Jeffrey Gundlach, CEO of DoubleLine Capital, has expressed skepticism toward the US stock market’s recent rally, advocating instead for increased allocations to gold and other non-dollar assets amid concerns over inflation, fiscal deficits, and the weakening US dollar. In multiple recent appearances, Gundlach highlighted gold’s outperformance this year, noting that the precious metal has surged over 40% year-to-date and could potentially reach $4,000 per ounce before year-end. His bullish stance on gold is rooted in a combination of factors, including the Federal Reserve’s dovish monetary policy, elevated inflation expectations, and the dollar’s declining global appeal.

Gundlach’s rationale for gold is grounded in its role as an inflation hedge and a safe-haven asset. He argued that the dollar’s weakness—driven by large US budget deficits and shifting international capital flows—has made greenback-denominated assets less attractive. “Gold is in a winning mode because of the weaker dollar, and I believe that’s going to continue,” he stated, emphasizing that investors should consider allocating up to 25% of their portfolios to gold as an “insurance policy” against macroeconomic risks. This view aligns with broader trends, as gold has outpaced both stocks and Bitcoin this year, with the latter rising 19% compared to gold’s double that return.

The bond investor also pointed to structural shifts in global markets, including central banks’ aggressive gold-buying campaigns and the “anti-dollar” theme gaining traction. Central banks, particularly in emerging markets, have added over 1,000 tonnes of gold annually since 2022, signaling a strategic move away from dollar-dominated reserves. Gundlach linked these developments to the dollar’s declining share of global foreign exchange reserves, which fell to 57.74% in Q1 2025 from over 70% in 1999. He warned that the dollar’s weakening could persist as geopolitical tensions and fiscal pressures erode confidence in US assets.

Beyond gold, Gundlach outlined alternative investment strategies to hedge against dollar-related risks. He recommended overweighting European and Asian stocks (excluding China) as a diversification play, citing the EUR STOXX 50’s 10.8% year-to-date gain and Asia’s 27% rise in emerging markets. However, he cautioned against Chinese equities due to capital controls and geopolitical uncertainties. Gundlach also noted that gold miner stocks have surged alongside bullion prices, indicating growing retail participation in the gold market. This momentum, he argued, could further reinforce gold’s appeal as a long-term allocation.

The market’s inverse relationship between the US dollar and gold has been a key driver of recent price action. The US Dollar Index (DXY) has fallen 11% year-to-date, while gold approached an all-time high of $3,744 after the Fed’s first rate cut of 2025. Analysts attribute this dynamic to lower real yields, which reduce the opportunity cost of holding non-yielding assets like gold. Gundlach’s forecast for gold hinges on the continuation of this trend, with rate cuts and inflationary pressures expected to support the metal’s rally. However, some observers caution that a stronger dollar or hawkish Fed surprises could disrupt the current trajectory.

Gundlach’s bearish outlook for US equities contrasts with the broader market’s optimism. He cited divergent views within the Fed on inflation and the potential for premature rate cuts to exacerbate price pressures. Additionally, he highlighted the US stock market’s underperformance relative to international peers, with non-US equities outpacing their US counterparts by 10% year-to-date. This gap, he argued, reflects a shift in global market leadership driven by revised growth expectations and the dollar’s weakening.

The bond king’s comments underscore a broader re-evaluation of portfolio allocations in response to macroeconomic uncertainties. As investors grapple with inflation, fiscal risks, and currency volatility, gold’s role as a hedge has gained prominence. With central banks and retail investors alike increasing their exposure to the metal, the question for markets is not whether gold will continue its rise but how sustained this trend can be amid evolving monetary policy and geopolitical dynamics.

Source: [1] DoubleLine's Jeffrey Gundlach believes holding a 25% gold ... - CNBC (https://www.cnbc.com/2025/09/17/doublelines-jeffrey-gundlach-believes-holding-a-2gold-hitting-4000-before-year-end-says-a-25percent-weighting-is-not-excessive.html?msockid=16113e13781d68e336d4287d79f7694e) [2] ‘Bond King’ Jeffrey Gundlach Says He’s Holding On to One Asset … (https://dailyhodl.com/2025/09/14/bond-king-jeffrey-gundlach-says-hes-holding-on-to-one-asset-thats-outperforming-stocks-and-bitcoin-this-year/) [3] Investment Ideas: 3 Areas 'Bond King' Jeff Gundlach Likes Amid ... (https://www.businessinsider.com/stock-investing-ideas-inflation-hedge-gold-jeff-gundlach-bond-king-2025-9) [4] Why Holding Assets Outside the US Dollar Has Paid … (https://www.morningstar.com/portfolios/why-holding-assets-outside-us-dollar-has-paid-off-2025) [5] Five Takeaways for Country Investing from 2025’s … (https://www.msci.com/research-and-insights/blog-post/five-takeaways-for-country-investing-from-2025-historic-equity-shift) [6] The Inverse Tango: How the Weakening US Dollar is Fueling Gold’s … (https://bulliontradingllc.com/blog/inverse-tango-weak-us-dollar-fuels-gold-rally-2025/)