David Einhorn Believes Fed Will Implement "Substantially More Than Two" Rate Cuts This Year, Boosting His Gold Conviction

Greenlight Capital’s David Einhorn, a prominent figure in the investment world known for his prescient calls, has expressed a strong conviction that the U.S. Federal Reserve will enact a greater number of interest rate cuts this year than currently anticipated by market participants. This outlook, he asserts, significantly bolsters his bullish stance on gold.

While recent economic data, particularly a surprisingly robust January jobs report released on Wednesday, has tempered expectations for immediate and aggressive monetary easing, traders are still pricing in a high probability of at least two quarter-percentage-point rate reductions by the close of the year. The CME FedWatch Tool indicates an over 88% chance of this scenario. However, Einhorn fundamentally disagrees with the market’s interpretation of the latest employment figures as a reason to delay rate cuts.

In an interview with CNBC’s "Money Movers" host Sara Eisen on Wednesday, Einhorn articulated his belief that the market’s reaction to the jobs report is misguided. He went further, suggesting that the actual number of rate cuts could exceed current forecasts. This optimism stems from his expectation that Kevin Warsh, President Donald Trump’s chosen nominee to succeed Jerome Powell as the Federal Reserve’s chairman, will successfully advocate for a more accommodative monetary policy.

Einhorn elaborated on his reasoning, stating, "If we have 4% or 5% inflation, sure, then he won’t be able to persuade people, but otherwise he’s going to argue productivity." He anticipates that Warsh will champion rate cuts even if the economy appears to be performing strongly. "I think by the time we get to the end of the year, it’s going to be substantially more than two cuts," Einhorn declared.

The hedge fund manager’s conviction in this outlook is closely tied to his significant holdings in gold. The precious metal experienced a notable sell-off at the end of the previous month. This decline followed President Trump’s announcement of Warsh as his nominee for Fed chair, a move that was perceived by some on Wall Street as diminishing anxieties surrounding the Federal Reserve’s independence from political influence.

However, gold, traditionally viewed as a hedge against inflation, has since shown signs of recovery. Gold futures have recorded gains of over 17% year-to-date. This follows an extraordinary surge of more than 60% in 2025, a period characterized by concerns over threats to central bank independence, escalating geopolitical tensions, and persistent instability in trade policy. Since the beginning of 2024, gold has appreciated by more than 120%.

Einhorn, who achieved widespread recognition in 2008 for his successful short position against Lehman Brothers, highlighted that gold’s increasing appeal stems from its evolving role as a preferred reserve asset among global central banks. He posited that the current landscape of U.S. trade policy, marked by its inherent instability, is prompting other nations to seek alternatives to settling trade transactions in U.S. dollars.

Looking at the longer term, Einhorn identified a fundamental reason for holding gold in the current economic environment: the perceived irrationality of the relationship between U.S. fiscal and monetary policies. He also suggested that other major developed currencies are facing challenges that are either comparable to or more severe than those impacting the U.S. dollar.

The U.S. dollar itself recently experienced its most significant single-day decline since April 2025. This sharp fall occurred after President Trump indicated that he was not overly concerned about the currency’s recent weakness. Einhorn observed that potential disruptions could arise in the coming years concerning major global currencies.

Einhorn further characterized betting on additional Fed rate cuts as "one of the best trades out there right now." His investment strategy also includes a long position in futures on the Secured Overnight Financing Rate (SOFR), which effectively represents a bet on a continued decline in short-term interest rates. This multifaceted approach underscores his belief in a more accommodative monetary policy environment and the enduring strength of gold as an investment.