Reserve asset #1: why does David Einhorn favor gold over Treasuries?
Gold is becoming the main reserve asset instead of US Treasuries, says the founder of Greenlight Capital / Photo: Shutterstock.com
Gold is displacing US government bonds and becoming a key global reserve asset, says David Einhorn, founder of Greenlight Capital. According to the investor, irrational fiscal policy of Washington and overheated stock market deprive traditional instruments of fundamental support. Under these conditions, the investor chooses precious metals and bets on aggressive rate cuts by the Fed - a scenario that the market is still underestimating.
Details
Einhorn points to a fundamental shift in the behavior of global regulators, who are turning away from dollar assets because of Washington's unpredictability. In an interview with CNBC, he said that this process has already moved into an active phase.
"Gold is becoming the primary reserve asset in place of US Treasuries, or at least they are now almost equal in importance. US trade policy is extremely unstable, and this is forcing other countries to look for ways to settle in anything other than the US dollar. In my opinion, this has been the driver of gold prices"
In addition to the dollar, Einhorn sees systemic risks in other world currencies. For example, he considers Japan's debt load (over 200% of GDP) to be critical. In crisis conditions, gold becomes an alternative to fiat money.
Because of the critical US budget deficit of 5-6% of GDP, government bonds are losing their safe-haven status - which is what Einhorn attributes to the actions of central banks, which bought a record 863 tons of gold in 2025, raising its price to $5100 per ounce.
Einhorn calls the overheated stock market another reason for going into gold. In his opinion, stock prices have lost touch with reality, as there are almost no people left in the market who are able to objectively assess the value of business.
"Most investors don't pay attention to valuation at all. People who invested professionally and used to think about value were dismissed or replaced by index funds"
In a situation where quotes no longer rely on financial statements, gold remains the only way for Einhorn to hedge against "fiscal and monetary mismanagement."
The investor's strategic calculation is based on the belief that the Fed will go for more radical policy easing than Wall Street is laying down. Einhorn expects potential regulator head Kevin Warsh to find arguments to cut rates even with a strong economy: "I think the market is wrong today. One of the best deals right now is to bet on more cuts than expected," he summarizes. To monetize this scenario, the Greenlight Capital fund has opened long positions in SOFR futures, betting on falling interest rates.
This article was AI-translated and verified by a human editor
