One of Wall Street’s most intimidating hedge fund managers on the dollar’s decline: gold is ‘turning into the reserve asset’

Last month, gold soared past $5,300 per ounce as President Donald Trump’s hawkish foreign policy and tariff threats drove investors towards safer assets. Meanwhile, U.S. deficit spending ballooned to an unsustainable $1.9 trillion, as described by the Congressional Budget Office, a situation that is eroding the dollar’s status as the world’s leading reserve currency.

The combination of these factors has led some investors to predict the decline of Treasury securities as the sole true global reserve. Greenlight Capital founder David Einhorn made this clear in a recent conversation with [missing entity]. The investing legend anticipates a significant shift in global reserve assets, forecasting that central banks will exchange dollars for the precious yellow metal.

“Central banks around the world are purchasing gold,” Einhorn stated. “Whereas a few years ago, it was mainly Treasurys.” He further added that it is “becoming the reserve asset” because U.S. trade policy “is highly unstable, causing other countries to say they want to settle their trade in something other than U.S. dollars.”

To be certain, the dollar still holds dominance as the preferred reserve currency. Although central banks sold off over $48 billion in Treasuries in the first half of last year, in July 2025, the dollar still accounted for roughly 58% of all foreign exchange reserves, according to [missing source]. And central bank purchases of gold actually decreased in 2025 from a high between 2022 and 2024, as per data from [missing source].

Moreover, Einhorn has long predicted that the price of gold will rise due to concerns regarding U.S. monetary and fiscal policies. In an interview with [missing entity] last year, the hedge – fund manager argued that “Gold is not about inflation. Gold is about the confidence in the fiscal policy and the monetary policy.” While the investor isn’t exactly advocating for a return to the gold standard, he is a strong advocate of holding the metal as a safeguard against U.S. fiscal and monetary mismanagement.

On Wednesday, Einhorn added that U.S. trade policy is causing unease across global markets, fueling the “[missing trend]” trend and prompting central banks to turn to safer assets like gold. Although gold prices have declined since reaching their peak last month, the value of the metal remains high, at around $5,100 per ounce as of Thursday morning.

The Einhorn effect

Einhorn has gained a reputation for spotting financial warning signs. The hedge – fund manager rose to prominence in the investing world in 2002 after taking a short position on Allied Capital, a mid – cap financial company. After delivering a speech about his stance at the Sohn Investment Research Conference, the company’s stock dropped by 20% as Einhorn accused the company of defrauding the Small Business Administration.

Einhorn followed a similar strategy in 2007 after shorting Lehman Brothers, sharing his analysis about the financial institution’s excessive exposure to subprime mortgage – backed securities at the Value Investing Congress. His prescient warnings about major firms through well – researched presentations—and the subsequent drops in their stock prices—have popularized the phrase “[missing phrase],” used to highlight the hedge – fund manager’s remarkable influence on investor decisions. (This is not to be confused with the “[missing phrase]” from the Call of Duty video game.)

Deficit fears fuel a bet on gold

Just as his early short positions exposed weaknesses in major financial institutions, the investor now perceives structural vulnerabilities in government fiscal and monetary policies. Einhorn on Wednesday emphasized his view on gold, stating “our long – term thesis on gold has been that our fiscal policy and our monetary policies don’t make any sense.” At the current spending rate, the U.S. deficit – to – GDP ratio is expected to reach 6.7% by 2036, according to [missing source]. However, Einhorn also noted that other major developed currencies maintain high deficit – to – GDP ratios, explaining why gold, rather than a foreign currency, could become the preferred global reserve.

Part of Einhorn’s confidence in gold is based on his belief that the Federal Reserve will implement more interest rate cuts than currently expected. “I think one of the best trades right now is betting on more cuts this year than anticipated,” he said. “I think by the end of the year, there will be significantly more than two cuts.”

Yet even as [missing entity] made the prospect of another rate cut seem distant, Einhorn is betting that Warsh as Fed chair will be able to convince the committee to approve rate cuts.

“He’s going to come up with arguments that will persuade people,” Einhorn said.