Bond King Bill Gross Says Gold Has Now Become A 'Momentum/Meme Asset: 'If You Want To Own It…'
News Summary
Legendary bond investor Bill Gross has advised caution on gold investments, despite its significant rally in 2025, surging 56% year-to-date to $4,249 per troy ounce and doubling since early 2024. He believes gold has become a "momentum/meme asset" and suggests waiting to buy. Gross also expressed concerns over budget deficits and a slowing economy, highlighting Wall Street's unease about potential issues in banks' loan portfolios. He cited JPMorgan CEO Jamie Dimon's warning about the collapse of auto lender Tricolor and disclosures from Zions Bancorporation and Western Alliance Bancorp regarding troubled borrowers, indicating that regional bank "cockroaches" may continue to affect stocks and bonds. Gross predicts that 10-year Treasury yields should be closer to 4.5% rather than below 4% due to excessive government debt supply amidst slowing economic growth. This cautionary stance contrasts with other experts like Ed Yardeni, who forecasts gold at $5,000 by 2026 and $10,000 by 2030, and Ray Dalio, who advocates for gold diversification in "very, very dark times."
Background
Bill Gross is renowned as the "Bond King" for his long track record of success in the bond market. His market views are closely watched due to his deep understanding of macroeconomic trends and interest rates. The current year is 2025, and the global economy faces various challenges, including persistent inflationary pressures, slowing growth in major economies, and mounting budget deficits for the US government under President Donald J. Trump. The US regional banking sector has experienced volatility in 2023 and 2024, notably with the collapse of Silicon Valley Bank, raising concerns about financial system stability and prompting vigilance regarding bank loan portfolio health.
In-Depth AI Insights
What are the implications for investors when gold is labeled a 'momentum/meme asset,' and how does this affect its traditional role as a safe haven? - Gross's comments suggest that gold's price surge might no longer be solely driven by its traditional safe-haven attributes, but rather by speculative inflows and retail investor herd behavior. - This implies increased short-term volatility for gold, making its price movements more susceptible to market sentiment and technical indicators rather than fundamental drivers. - Investors need to re-evaluate gold's position in their portfolios: while it may offer quick gains in the short term, it also carries higher correction risk, potentially undermining its reliability as a pure hedge against inflation or geopolitical risks. How do Gross's concerns about regional bank 'cockroaches' and rising Treasury yields intersect with the broader economic outlook for 2025-2026? - Potential issues within regional bank loan portfolios (the 'cockroaches') could lead to a credit crunch, especially in high-risk areas like commercial real estate, thereby dampening economic growth. - As the US government under President Trump continues to face substantial budget deficits and increase Treasury supply, rising yields will escalate government borrowing costs and potentially crowd out private investment, further dragging on the economy. - These factors collectively point towards a low-growth, high-interest rate environment, which could put pressure on corporate earnings and equity valuations, particularly in sectors reliant on cheap credit. Given the divergence in expert opinions on gold (Gross vs. Yardeni/Dalio), what different investment philosophies are at play, and what scenarios might validate each perspective? - Gross's cautionary stance reflects a focus on fundamentals and risk, suggesting current gold prices are detached from economic reality. This represents a value investing or macro-prudential perspective, emphasizing intrinsic asset value and market bubble risks. - Yardeni's and Dalio's bullish outlooks reflect concerns about inflation hedging, geopolitical uncertainty, and global economic 'dark times.' This philosophy is more geared towards macro-hedging and diversification strategies, viewing gold as the ultimate asset against systemic risks. - If global inflation remains persistently high, geopolitical conflicts escalate, and major central banks maintain accommodative policies, Dalio's and Yardeni's predictions are more likely to materialize. Conversely, if economic growth further slows, credit tightening leads to deflationary pressures, or central banks surprisingly tighten, Gross's cautious stance may be validated.