It's best to have gold as Fed won't tame inflation - David Einhorn

NEW YORK (June 10) - The gold market may be facing some difficult headwinds as the Federal Reserve continues to aggressively raise interest rates to cool down inflation. However, some significant players still see value in the precious metal, including famed hedge fund manager David Einhorn, founder of Greenlight Capital.

Speaking at the Sohn Investment Conference Thursday, Einhorn said that he sees gold prices going much higher as the Federal Reserve ultimately fails to control inflation.

"The Fed is bluffing," Einhorn said at the conference. "The Fed doesn't really have the tools to stop the inflation. When the Fed has to choose between fighting inflation and supporting the Treasury, I think it has to pick the Treasury. At that point, it's best to have some gold."

Einhorn also commented on the growing de-dollarization trend among some central banks. The U.S. and its Western Allies have weaponized the U.S. dollar and imposed tough sanctions on Russia due to its ongoing invasion of Russia.

These sanction has led some nations to reevaluate their U.S. dollar reserves. Einhorn said that the growing geopolitical uncertainty will continue to support gold.

"When countries don't trust each other over bonds, and currencies, gold becomes the ultimate reserve asset. Gold as a percentage of total reserves remains staggeringly low," he said. "The question is whether there's enough gold to back the currency reserves? The answer is for the price of gold to go higher, perhaps much higher."

Einhorn has been a long-time proponent of physical gold, which represents a significant position in his fund. According to Reuters, Greenlight Capital's fund is up 20.9% this year due to its gold investment and macro trade.

"I hold gold, and I am never going to get rid of it. I hope that I never have to use it," Einhorn told Kitco News at the Sohn Conference in 2019.

KITCO