Gold blasted past $5,300 per ounce last month as President Donald Trump’s hawkish foreign policy and tariff threats sent investors to safer assets. At the same time, U.S. deficit spending swelled to what the Congressional Budget Office called an unsustainable $1.9 trillion, a scenario that’s chipping away at the dollar’s standing as the world’s leading reserve currency.
“The central banks around the world are buying gold,” Einhorn said. “Whereas a few years ago, it was mostly Treasurys.” He added that it is “becoming the reserve asset” because U.S. trade policy “is very unstable, and it’s causing other countries to say we want to settle our trade in something other than U.S. dollars.”
Einhorn has made a name for himself spotting financial red flags. The hedge fund manager rose to investing prominence in 2002 after taking a short position on Allied Capital, a mid-cap financial company. After giving a speech about his stance at the Sohn Investment Research Conference, the company’s stock went down 20% as Einhorn accused the company of defrauding the Small Business Administration.
Part of Einhorn’s confidence in gold is predicated on his belief that the Federal Reserve will issue more interest rate cuts than what’s currently anticipated. “I think one of the best trades out there right now is betting on more cuts this year than expected,” he said. “I think by the time we get to the end of the year, it’s going to be substantially more than two cuts.”
“He’s going to come up with arguments that are going to persuade people,” Einhorn said.
