Greenlight Capital’s David Einhorn is turning to gold as a protective shield against the looming specter of inflation.
David Einhorn’s Hedge
In an interview at the 2024 Sohn Investment Conference broadcast on CNBC’s “Power Lunch,” Einhorn boldly declared his belief in the resurgence of inflation, stating that the trend was irreversible.
Speaking on CNBC, the billionaire investor projected a scenario where the Federal Reserve would implement fewer rate cuts than what the market had priced in for the year. The consensus pointed towards three rate cuts in 2024, but Einhorn threw doubt on such expectations, suggesting the possibility of no cuts at all.
As the Fed persists in its aggressive monetary policies, Einhorn fears the mounting risk of an economic slump. Greenlight Capital, under his astute leadership, has been accumulating shares in SPDR Gold Trust (GLD) to counter this eventuality. However, Greenlight’s gold exposure extends beyond just ETFs, with physical gold bars also forming a significant part of their portfolio.
Einhorn’s Sentiments
Einhorn expounded on his concerns saying, “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 to all-time highs has been fueled in part by expectations of a dovish turn by the Fed. In environments with low-interest rates, gold often outshines fixed-income assets in terms of attractiveness.
The Future, According to Einhorn
When probed about the timing of the anticipated negative event, Einhorn cryptically remarked that it was not a matter of if, but when. He, however, admitted that predicting the precise moment remained beyond his reach.
“As long as the market maintains its unwavering confidence, all is well. But should that sentiment falter… then we are faced with a genuine problem,” Einhorn cautioned.
Einhorn’s strategic move comes at a time when investors are questioning the Fed’s next steps in light of inflationary pressures and economic uncertainties.
Source: Benzinga Pro
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