- Hedge fund manager cites increasingly aggressive policies
- Fed is ignoring employment and core inflation data, he says
Hedge fund manager David Einhorn said his stake in gold is poised to generate profits as central banks around the world continue to ease monetary policy.
Discussing the results for reinsurer Greenlight Capital Re Ltd. Tuesday, Einhorn criticized the European Central Bank’s “kitchen-sink policy" of record-low borrowing costs, expanded asset purchases and borrowing subsidies. He also said the Bank of Japan’s negative interest rate policy and reduced forecasts for U.S. rate hikes may contribute to boosting the value of gold.
“These increasingly aggressive and counterproductive monetary policies are bullish for gold," Einhorn, who is chairman of Greenlight Re, said on the call.
Gold posted its best quarter since 1986 as the Federal Reserve took a more dovish tone, after plunging 10 percent last year. The metal has traditionally accounted for almost 10 percent of the investment portfolio at Greenlight Re as Einhorn has long held the view that central banking stimulus will stoke inflation and push up the metal’s value.
Gold was one of the Greenlight hedge fund’s five largest disclosed long positions at the end of the first quarter. Shares of Greenlight Re have gained 15 percent this year through yesterday. The stock was little changed at $21.43 at 10:02 a.m. in New York.
Einhorn’s comments today echo scrutiny about monetary policy in the first quarter letter his hedge fund sent to investors yesterday.
“The Fed’s ‘data dependency’ doesn’t appear to relate to employment, which continues to improve, or core inflation, which is now running above its two percent target," the firm wrote in the letter. “We believe the increasingly adventurous monetary policy is bullish for gold."
Easing monetary policy was also behind one of its largest losing bets in the first quarter. Japanese lender Resona Holdings Inc. dropped 32 percent in the first quarter after the Bank of Japan unveiled its negative-rate strategy in January.