Gold helps power billionaire Einhorns Greenlight fund to 15% first-quarter gain
Despite regularly being bashed in the mainstream media, gold has some major advocates among billionaire investing gurus. Paulson & Co. founder John Paulson, who holds the largest stake in the worlds biggest gold-linked exchange-traded fund, is one. Bridgewaters Ray Dalio, Elliott Managements Paul Singer, and ex-Duquesne Capital chief Stanley Druckenmiller are some others, while George Soros consistently holds stakes in mining companies.
And another highly respected (and wealthy) gold bull is Greenlight Capitals head, David Einhorn. His hedge funds first-quarter letter to investors confirms his ongoing faith in the yellow metal. The funds shares have gained 15% so far in 2016, and gold has played a large part in that advance, being one of its top-five biggest holdings.
Einhorn cited ongoing easy-money policies from the European Central Bank and the Bank of Japan, which are currently engaged in massive quantitative-easing programs and negative-interest-rate policies. These increasingly aggressive and counterproductive monetary policies are bullish for gold, he noted.
Meanwhile, the U.S. Federal Reserve also has failed to raise rates after an initial hike in December, apparently ignoring the fact that its meeting or exceeding the economic criteria it set as prerequisites for lifting rates. The Feds data dependency doesnt appear to relate to employment, which continues to improve, or core inflation, which is now running above its two percent target, Greenlight analysts wrote. We believe the increasingly adventurous monetary policy is bullish for gold.
Like Paulson, Einhorn has taken some heat over the years by sticking with his gold investment during leaner times. Now that persistence appears to be paying off.
However, unlike Paulson and some other big Wall Street players, Einhorn has made clear in the past that he prefers holding the yellow metal itself, not electronic representations in the form of ETF and mining shares and futures contracts.
According to a June 2013 Reuters story, Einhorn has said he prefers investing in gold bars, as opposed to the popular gold exchange-traded fund, SPDR Gold Shares, partly to have better control over his investment and keep a lid on trading expenses.
Not to say that gold ETFs are all bad: Current inflows have risen back to levels unseen since 2013, and that interest from mainstream investors is one reason why gold is soaring this year. Meanwhile, the central-bank policies that Einhorn cites in his letter likely will keep the yellow metal advancing in 2016.