David Einhorn turns bullish on gold, believing investors have become too complacent about the geopolitical uncertainties.
David Einhorn, founder and President of Greenlight Capital Hedge fund, a long-short value-oriented hedge fund, penned in a Q3 letter to investors his concerns about geopolitical instability, rising oil prices and inflation.
“David Einhorn turns bullish on gold, believing investors have become too complacent about the geopolitical uncertainties”
WEALTH TRAINING COMPANY
Greenlight Capital reported a sizable increase in the fund’s exposure to the safe haven asset as David Einhorn turns bullish on gold
According to third-quarter 13-F filings with the Securities and Exchange Commission, Greenlight plunged $34.9 million into SPDR Gold Trust, the world’s largest gold-backed ETF. That increased the fund’s stake in the ETF by 89.2%, a record exposure to gold for Greenlight.
Investors seeking exposure to gold can either buy the physical metal or invest in an exchange-traded fund ETF. SPDR is an example of a gold-backed ETF, where the gold is physically held by the issuer and traded on the market like stocks.
The advantage of SPDR is that investors can gain exposure to gold without storage costs and or fears of having their gold stolen.
Short-term gold speculators, and traders, appreciate the liquidity gold ETFs offer.
But gold ETFs are not a substitute for owning physical bullion, and perma gold bulls like SchiffGold recommend buying the physical gold first.
“Investors seeking exposure to gold can either buy the physical metal or invest in an exchange-traded fund ETF”
WEALTH TRAINING COMPANY
David Einhorn turns bullish on gold investments is a play on a pending crisis
Could David Einhorn be positioning his fund to profit from a calamity, as he did in the 2008 financial crisis?
Indeed, David Einhorn’s Greenlight call to fame was a winning bearish wager on Lehman Brothers before the 2008 financial crisis and subsequent bankruptcy of the Wall Street bank.
So Greenlight’s increased exposure to gold could be construed as a bearish shift into a safe haven strategy. The hedge fund also cut exposure to two of his largest holdings, homebuilder Green Brick Partners and Pennsylvania coal miner Consol Energy.
“The complacent investor view that geopolitics should be ignored might be true, except for the times when it isn’t” – David Einhorn
“The complacent investor view that geopolitics should be ignored might be true, except for the times when it isn’t. We suspect we are in one of those times. If we are right, current extreme levels of geopolitical tension will lead to lower stock prices over a timeframe that lasts more than a couple of hours,” he said.
David Einhorn is also concerned about rising input prices, such as oil, pushing inflation higher. Rising tension in the Middle East in the wake of Hamas terror attack on Israel and the latter invasion of the Gaza Strip could lead to higher oil prices.
Higher oil prices would squeeze the consumer and likely cause a recession. The resulting inflation would also put the Federal Reserve in the uncomfortable position of having to fight rising prices at a time of rising unemployment. This leaves the market outlook very concerning,” he said.
Greenlight Capital reported profits of 27.7% through Q3 of 2023.