Legendary bond investor Bill Gross urged caution about buying gold, which has been soaring recently, even as he warned on budget deficits and a slowing economy.
In a post on X on Friday, the cofounder of Pimco also acknowledged Wall Street’s anxiety over the past week about problems lurking in banks’ loan books.
Disclosures on Thursday from Zions Bancorporation and Western Alliance Bancorp about dodgy borrowers came after JPMorgan CEO Jamie Dimon pointed to the collapse of auto lender Tricolor as a “cockroach” that likely signals more are hiding elsewhere.
“Regional bank ‘cockroaches’ may continue to affect stocks AND bonds,” Gross predicted.
While analysts don’t think issues at the regional lenders signal systemic problems, memories of Silicon Valley Bank’s implosion just two years ago sent stocks tumbling Thursday and briefly pushed the 10-year Treasury yield below 4%.
But Gross said that move was overblown and instead expects yields to surge well above Friday’s close around 4.01%, given how much fresh debt the federal government must issue to cover budget shortfalls while growth is poised to cool sharply from current estimates of more than 3%.
“10 year Treasury has no business below 4% though 4.5% more like it — too much supply/deficits despite slowing, soon-to-be 1% growth economy,” he said.
Soaring debt among top developed economies, including the U.S., has turned investors skittish on global currencies, even traditional safe havens like the dollar. That’s fueled a so-called debasement trade that bets on precious metals and bitcoin, based on the assumption governments will let inflation run hotter to ease debt burdens.
As a result, gold prices have soared more than 50% so far this year and have doubled since early 2024. Silver, platinum, and palladium have notched even bigger year-to-date gains.
Market veteran Ed Yardeni, president of Yardeni Research, said recently that gold could skyrocket to $10,000 by per ounce the end of the decade if its current pace keeps up.
But Gross hinted that gold’s run now looks overextended, and prices fell more than 2% on Friday after hitting a record high above $4,300.
“Gold has become a momentum/meme asset. If you want to own it, wait awhile,” he wrote.
In a note earlier this month, Capital Economics made a similar observation about gold’s relentless rally. Climate and commodities economist Hamad Hussain said “FOMO” is creeping into the gold trade, making it harder to objectively value the metal.
On the bullish side, Hussain pointed to Fed rate cuts, geopolitical uncertainty, and fiscal sustainability concerns. On the other hand, he noted the recent gold rally came as the dollar was stable with inflation-protected bond yields higher—telltale signs of market exuberance.
“On balance, we think that gold prices will probably grind higher in nominal terms over the next couple of years,” he said on Oct. 8.
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