David Einhorn Predicts Fed Will Cut Rates More Than Expected, Boosts Gold Bets
By John Nada·Feb 12, 2026·4 min read
David Einhorn expects the Fed to cut rates more than anticipated, influencing his bullish outlook on gold. His views reflect broader concerns about currency stability and inflation.
David Einhorn, the founder of Greenlight Capital, asserts that the Federal Reserve will implement more interest rate cuts this year than currently anticipated, reinforcing his bullish stance on gold. While traders are pricing in a high probability of two quarter-percentage-point cuts by year’s end, Einhorn believes this outlook is misguided. He anticipates that Kevin Warsh, the nominee to succeed Jerome Powell as Fed chair, will advocate for deeper cuts, even in a robust economy. Despite a recent uptick in jobs data that some saw as a reason for the Fed to pause on rate cuts, Einhorn argues that the prevailing narrative is incorrect.
He is confident that if inflation remains moderate, Warsh will push for additional cuts based on productivity arguments. Einhorn suggests that by December, the number of cuts could surpass current expectations, fundamentally altering market dynamics. Einhorn's strategy includes a significant investment in gold, which recently experienced a sell-off after Warsh's nomination eased fears over Fed independence. Gold has rebounded, gaining over 17% this year, following a dramatic rise of more than 60% in 2025, driven by concerns regarding central bank stability and geopolitical factors.
The hedge fund manager highlights gold's increasing status as a reserve asset among central banks, suggesting that ongoing instability in U.S. trade policy is prompting other nations to seek alternatives to the dollar for trade settlements. He points out that the relationship between fiscal and monetary policies is increasingly concerning, and that many major currencies are facing similar or worse issues than the dollar. This perspective gained traction after the U.S.
dollar experienced its largest single-day decline since April 2025, following comments from Trump suggesting he was not worried about the currency's weakness. Einhorn sees significant potential for currency challenges in the coming years, making his bet on gold and associated futures a strategically sound decision. Einhorn describes betting on more rate cuts as a top trade opportunity, positioning himself long on futures tied to the Secured Overnight Financing Rate (SOFR), indicating a belief that short-term interest rates will continue to decline. His confidence reflects an understanding that the broader economic environment is ripe for shifts that could favor non-dollar assets like gold.
Einhorn's assessment is particularly notable given the current economic landscape. The anticipated cuts to interest rates could serve as a catalyst for a broader shift in investment strategies. If the Fed indeed lowers rates more than expected, this could lead to a depreciation of the dollar, further enhancing gold's appeal as a safe-haven asset. Investors often flock to gold during periods of economic uncertainty, and Einhorn's insights suggest that we might be entering such a phase.
Additionally, Einhorn's focus on Warsh's influence within the Fed underscores the importance of leadership in shaping monetary policy. Warsh's approach to the economy, especially his willingness to advocate for cuts despite a seemingly strong job market, indicates a potential shift in the Fed's historical reluctance to lower rates during periods of growth. This shift could be pivotal in shaping market expectations and investor sentiment. The volatility of the U.S.
dollar, accentuated by Trump's comments, reflects broader concerns about fiscal policy and its coherence with monetary policy. Einhorn's observations about the instability of U.S. trade policy resonate well with the growing sentiment among global central banks to diversify their reserves away from the dollar. The move towards gold as a reserve asset signifies a strategic pivot, as nations seek stability in their trade settlements amidst fluctuating currency values.
The implications of Einhorn's predictions extend beyond gold. If his forecasts materialize and the Fed implements more aggressive cuts, this could trigger a reallocation of assets across various sectors. Equities might react negatively to rate cuts, as lower interest rates may indicate underlying economic weaknesses. Conversely, sectors such as utilities and real estate that benefit from lower borrowing costs could see increased investment.
Moreover, Einhorn's long position on SOFR futures signals a broader belief in a sustained period of low interest rates. Such an environment could foster a favorable climate for growth-oriented investments, yet it also raises concerns about inflation and the potential need for future rate hikes. The delicate balance the Fed must navigate could lead to increased market volatility and uncertainty. In light of these dynamics, investors should remain vigilant and adaptable.
Einhorn's predictions serve as a reminder of the interconnectedness of fiscal and monetary policies and their profound impact on market conditions. As Warsh prepares to take the reins at the Fed, the potential for significant shifts in policy direction could reshape the landscape for both traditional and alternative investments. Ultimately, Einhorn’s bullish outlook on gold and his anticipation of more aggressive rate cuts reflect a broader narrative about economic stability and currency valuation.