Greenlight Capital founder David Einhorn (David Einhorn) said on Thursday that the Federal Reserve is bluffing to raise interest rates, pretending that it can tame inflation, and believes that in the current price environment, gold prices may move significantly higher.
“The question is whether there is enough gold to support foreign exchange reserves,” Einhorn said at the Sohn Investment Conference. “The answer is that gold will go higher, maybe significantly higher.”
Einhorn has always considered gold to be an extremely important asset in a portfolio. His fund is up 20.9% this year, helped by investments in gold, macro trades and bets that stocks of some unnamed companies will fall.
Einhorn said the Fed has limited tools to control inflation, mainly because of the U.S. deficit. When interest rates rise, so does America’s debt.
“The Fed is bluffing,” not fighting inflation, he said, and the Fed may choose to support Treasuries. “Just wait until they’re forced to relax and let inflation soar to support the national debt. At this point, it’s better to have some gold. That’s what Grandpa Ben (former Fed Chairman Ben Bernanke) taught me.”
He also said some countries may decide to sell off their dollar reserves after the U.S. froze the Russian central bank’s foreign exchange reserves earlier this year.
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