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Jeff Gundlach buys S&P 500 puts, eyeing gold

  • Jeffrey Gundlach believes the price of gold is at a crucial point.
  • The DoubleLine Capital CEO said Thursday the precious metal is "coiling."
  • The investor also revealed to Reuters a new position based on the market's recent low volatility.

Jeffrey Gundlach speaking at the 22nd Annual Sohn Investment Conference on May 8, 2017.
Adam Jeffery | CNBC
Jeffrey Gundlach speaking at the 22nd Annual Sohn Investment Conference on May 8, 2017.

"Bond King" and widely followed investor Jeffrey Gundlach recently purchased five-month put options on the S&P 500 index, Reuters reported Thursday. Earlier, the DoubleLine Capital CEO tweeted about gold, a sign he may be getting cautious, or at least partly hedging the equity market here.

Gundlach is trying to capitalize on the lowest CBOE Votality Index level since December 1993, according to the Reuters report.

"We lost money the first day we put on the trade, but now we are doing great. This is like free money," Gundlach told Reuters. "We are in a seasonally weak period for stocks but more importantly, we think the VIX was really, really low. So the S&P puts are going long volatility."

Gundlach in an earlier tweet Thursday pointed out that the price of gold is at a "key juncture."

The chart below illustrates the "coiling," a pattern similar to a snake ready to strike, which Gundlach referenced.

Gold 5-year chart (50 DMA Green, 100 DMA Yellow, 200 DMA Purple, Trendline Red)

Source: FactSet

Gold touched a 6-week high Thursday after the Fed kept interest rates unchanged on Wednesday.