David Einhorn says the Fed will cut ‘substantially more’ than two times. So he’s betting big on gold

Greenlight Capital’s David Einhorn is bullish on gold and expects the Federal Reserve to issue more interest rate cuts this year than what is currently anticipated. Despite the market’s reaction to the better-than-expected January jobs report, Einhorn believes that the rate cuts could be higher than the two quarter percentage point cuts currently being priced in by traders.

Einhorn’s confidence in his gold bet stems from his belief that Kevin Warsh, President Donald Trump’s pick for Fed chair, will be able to persuade the committee to implement more rate cuts. He predicts that Warsh will argue for cutting rates even if the economy is performing well, citing productivity as a key factor.

The hedge fund manager’s optimism in gold is also driven by the metal’s role as a reserve asset among central banks worldwide. He notes that global uncertainties, such as unstable U.S. trade policies and concerns about major currencies, are prompting countries to seek alternatives to the U.S. dollar for trade settlements.

In addition to his gold bet, Einhorn is also long on futures for SOFR (Secured Overnight Financing Rate), indicating his belief that short-term rates will continue to decline. He sees betting on more rate cuts as one of the best trades currently available in the market.

Overall, Einhorn’s outlook on gold and interest rates reflects his assessment of the current economic landscape and his expectations for future policy decisions. His investment strategy underscores the importance of diversification and staying attuned to macroeconomic trends in today’s volatile market environment.