Renowned investor David Einhorn of Greenlight Capital is embracing gold as a sanctuary against rising inflation.
The Hedge: Speaking at the 2024 Sohn Investment Conference aired on CNBC’s “Power Lunch,” Einhorn voiced concerns about the resurgence of inflation.
Einhorn stated, “I think inflation is reaccelerating. I think there’s a lot of indication of that.”
Contrary to market expectations of three rate cuts by the Federal Reserve this year, Einhorn anticipates a different scenario. He suggested the possibility of no rate cuts at all, underscoring that prolonged aggressive monetary measures by the Fed could precipitate an economic decline.
Greenlight Capital has been actively acquiring shares of the SPDR Gold Trust (GLD) as a protective measure. However, their gold exposure extends beyond GLD, including ownership of physical gold bars. Einhorn emphasized, “We own a lot more gold than just the GLD. We own physical bars as well. So gold is a very large position for us.”
Einhorn highlighted concerns about the nation’s loose monetary and fiscal policies, foreseeing potential hazards. Describing gold as a hedge against adverse events, he cautioned, “There’s a problem with the overall monetary and fiscal policies of the country, and if both policies are systemically too loose, I think the deficits are ultimately a real problem, and I think that this is a way to hedge the risk of something, you know, not so good happening.”
The recent surge in gold prices, attributed in part to expectations of a Fed easing cycle, has bolstered gold’s appeal over fixed-income assets amidst low interest rates.
Einhorn, when asked about the potential risks ahead, emphasized the inevitability of challenges, though uncertain about their timing. He remarked, “As long as the market is confident in what’s going on, everything is fine. But the minute that that changes … then there’s a real problem.”
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GLD Price Action: At the time of publication, the SPDR Gold Trust was up 0.11% at $213.03.
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