Investing in natural gas today is similar to buying gold in 1997, before a surge in the precious metal’s price, according to Jeffrey Gundlach, chief executive officer of DoubleLine Capital LP.
The CHART OF THE DAY illustrates his analogy, made on a conference call two days ago. The chart compares gas-futures prices on the New York Mercantile Exchange with the price of gold for immediate delivery 15 years earlier.
Gundlach, whose Los Angeles-based firm runs mutual funds with $25 billion of assets, said on the call that he’s adding gas-related holdings to the DoubleLine Multi-Asset Growth Fund. His remarks were reported by the Business Insider and Pragmatic Capitalist blogs. A recording was unavailable yesterday pending a compliance review, according to Talkpoint.com, which hosted the call.
The fund had no more that 4.5 percent of assets in gas and other energy-related commodities as of March 31, according to data posted on the DoubleLine website. Hugoton Royalty Trust and San Juan Basin Royalty Trust, which own stakes in oil and gas properties, were among its holdings.
Natural gas fell below $2 per million British thermal units this month on the Nymex for the first time in a decade. Production increases from U.S. shale formations contributed to the decline. For the year, gas has lost 35 percent.
As 1997 ended, spot gold traded at its lowest price since 1979. The precious metal retreated 21 percent for the year and posted losses in each of the next three years. Since then, the price has risen sixfold, aided by an 11-year winning streak.