David Einhorn, founder and hedge fund manager of U.S. hedge fund Greenlight Capital, at the 2022 all-virtual Sohn Investment Conference on June 9 ) to sell gold to his audience. The Sohn Investment Conference, a popular gathering for the hedge fund industry, was formerly held at Lincoln Center in New York City.
At the Sohn Investment Conference, Einhorn said:
“The question is, does the Fed have enough gold to back monetary reserves. So gold prices could go higher, maybe significantly higher.”
Einhorn added that some countries may also decide to sell dollar reserves after the United States froze Russian central bank reserves earlier this year as sanctions. Einhorn has always believed that gold is an extremely important asset in an investment portfolio.
Einhorn rose to fame by betting against Lehman Brothers on the eve of the 2008 global financial crisis. In a downbeat report, Einhorn warned that despite the Fed’s efforts to curb demand by raising interest rates, price pressures could follow. Einhorn said the price of gold will rise sharply through 2023.
Einhorn called gold the “ultimate reserve asset” and warned that the Fed’s rate hikes weren’t actually helping to fight inflation, but exacerbated it, which could last for a long time. In the report, Einhorn repeatedly compared Fed Chairman Jerome Powell with the Fed under his predecessor Paul Volcker. In the 1980s, Volcker was known for tackling inflation with an aggressive rate hike plan.
Einhorn added that while both supply and demand are falling, supply is falling faster. Combined with the excessive fiscal spending by the US federal government, this will make inflation worse in the US and around the world.
The U.S. is already facing the highest inflation since 1981, but Einhorn said the level of inflation is still effectively underestimated, and existing inflation is likely to worsen. He also slammed the Fed for failing to raise interest rates quickly to control inflation.
Einhorn added that the Fed is “bluffing” by saying it has the ability to curb inflation through quantitative tightening:
The Fed has limited tools to control inflation, mainly due to the existence of deficits, and when interest rates rise, so does the nation’s debt. Einhorn likened the Fed’s anti-inflation plan to “a drop in the bucket.”
In Einhorn’s view, the Fed’s rate hike will lead to worsening inflation. He warned that the Fed may not raise interest rates at some point in 2023, and would choose to support the U.S. Treasury Department with additional U.S. debt.
“With inflation soaring, we just have to wait until the time comes when the Fed is forced to ease monetary policy and support the U.S. Treasury’s debt issuance. At that point, investors are better off holding some gold. This is Ben S. Summerwill (founder of Midwest Bank, the third largest bank in the U.S.) taught me.”
After several years of sluggish returns, Greenlight has outperformed this year, rising 20.9%, helped by its investments in gold, macro trading and bearish bets on the stocks of some unnamed companies,media reported.
U.S. stocks tumbled on Thursday, with the S&P 500 down 1.7 percent and the Dow Jones Industrial Average down more than 400 points on a combination of low volume and concerns about inflation data.
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