David Einhorn Launches Gold at Sohn Conference, Warns Fed Will Fail to Fight Inflation

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Greenlight Capital founder David Einhorn pitched gold to his audience at the all-virtual Sohn Investment Conference 2022, a grassroots gathering for the hedge fund industry previously held at Lincoln Center in New York City.

In a somber presentation where he warned that price pressures were likely to worsen despite the Federal Reserve’s efforts to undermine demand by raising interest rates, Einhorn – who became known for his bet against Lehman Brothers during the run-up to the financial crisis – said the price of the yellow metal would rise significantly as 2023 approaches.

Calling gold ‘the ultimate reserve asset’, Einhorn warned that ‘inflation is likely to be much more persistent’ as Fed rate hikes are actually making the situation worse, rather than helping. to fight it. The presentation included several unfavorable comparisons between Jerome Powell’s Federal Reserve and the institution under former Fed Chairman Paul Volcker, which tackled inflation in the 1980s with a program of aggressive rate hikes .

Einhorn added that if supply and demand decrease, supply decreases faster. This, compounded by budgetary excesses in US federal government spending, would help fuel inflation in the US and around the world.

Despite the fact that the United States is already facing the highest inflation since 1981, Einhorn said those levels are actually underestimated and are likely to get worse.

GC00 gold futures,
-0.32%
for August delivery traded near $1,850 an ounce in e-trade after falling 0.2% on Thursday to close at $1,852.80 an ounce. Einhorn also criticized the Federal Reserve for not raising interest rates quickly enough to help contain inflation.

Einhorn added that the Fed is “bluffing” about its ability to control inflation with quantitative tightening, and likened the central bank’s inflation-fighting program to “cleaning your snowy driveway with an ice cream scoop.” .

After several years of lackluster returns, Greenlight has outperformed its benchmark this year, posting a double-digit return in April alone, thanks to its bearish posture, according to a Bloomberg News report.

Einhorn said the Fed’s rate hike could instead cause inflation to worsen and warned the central bank would likely “capitulate” sometime in 2023.

Investors are eagerly awaiting May inflation data which is expected to be released on Friday morning.

U.S. stocks fell on Thursday as low trading volume and concerns over the inflation number undermined stocks, with the S&P 500 SPX,
-2.38%
down 1.7% and the Dow Jones Industrial Average DJIA,
-1.94%
lose more than 400 points.


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