It’s Best to Have Gold as Fed Won’t Tame Inflation

The comments below are an edited and abridged synopsis of an article by Kitco

The gold market may face headwinds as the Fed raises interest rates to cool inflation. However, some significant players still see value in the precious metal, including hedge fund manager David Einhorn, founder of Greenlight Capital.

It’s Best to Have Gold as Fed Won’t Tame Inflation - BullionBuzz - Nick's Top Six
Financial charts on a digital display, abstract background and three bars of gold on it.

Einhorn said that he sees gold going much higher as the Fed ultimately fails to control inflation.

“The Fed is bluffing,” Einhorn said. “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 US and its allies have weaponized the US dollar and imposed tough sanctions on Russia due to its ongoing invasion of Russia.

These sanctions have led some nations to reevaluate their US 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. 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 said.

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