One of Wall Street’s most feared hedge fund managers on the decline of the dollar: Gold is ‘becoming the reserve asset’

Gold blasted past $5,300 per ounce last month as President Donald Trump’s hawkish foreign policy and tariff threats sent investors to safer assets. At the same time, U.S. deficit spending swelled to what the Congressional Budget Office called an unsustainable $1.9 trillion, a scenario that’s chipping away at the dollar’s standing as the world’s leading reserve currency.

The confluence of these factors has some investors predicting the fall of Treasury securities as the only true global reserve. Greenlight Capital founder David Einhorn made that apparent in a recent conversation with CNBC. The investing legend forecasts a monumental shift in global reserve assets, predicting that central banks will swap dollars for the yellow metal.

“The central banks around the world are buying gold,” Einhorn said. “Whereas a few years ago, it was mostly Treasuries.” He added that it is “becoming the reserve asset” because U.S. trade policy “is very unstable, and it’s causing other countries to say, ‘We want to settle our trade in something other than U.S. dollars.’”

To be sure, the dollar still dominates as the reserve currency of choice. While in the first half of last year, central banks dumped over $48 billion in Treasuries, in July 2025, the dollar still composed roughly a 58% share of all foreign exchange reserves, according to the Philadelphia Federal Reserve Bank. And gold purchases by central banks actually fell in 2025 from a high between 2022 and 2024, according to data from the World Gold Council.

Also, Einhorn has long predicted the price of gold will rise out of fears around U.S. monetary policy and fiscal policy. In an interview with CNBC last year, the hedge fund manager argued: “Gold is not about inflation. Gold is about the confidence in the fiscal policy and the monetary policy.” While the investor isn’t quite advocating for a return to the gold standard, he is a strong proponent of holding the metal as a hedge against U.S. fiscal and monetary mismanagement. 

On Wednesday, Einhorn added that U.S. trade policy is sending jitters across global markets, fueling the “sell America” trend and sending central banks to safer assets like gold. While gold prices have eased since their peak last month, the currency’s value remains high, at around $5,100 per ounce as of Thursday morning. 

The Einhorn effect

Einhorn has made a name for himself spotting financial red flags. The hedge fund manager rose to investing prominence in 2002 after taking a short position on Allied Capital, a midcap financial company. After giving a speech about his stance at the Sohn Investment Conference, the company’s stock went down 20% as Einhorn accused the company of defrauding the Small Business Administration.

Einhorn followed a similar playbook in 2007 after shorting Lehman Brothers, sharing his thesis about the financial institution’s overexposure to subprime-mortgage-backed securities at the Value Investing Congress. His prescient callouts of major firms via thoroughly researched presentations—and the resulting stock tumbles they initiate—has popularized the phrase “the Einhorn effect,” used to highlight the hedge fund manager’s striking influence on investor decisions. (This is not to be confused with the “Einhorn revolving shotgun” from the Call of Duty video game.)

Deficit fears fuel a bet on gold

Just as his early short calls exposed cracks in major financial institutions, the investor now sees structural vulnerabilities in government fiscal and monetary policies. Einhorn Wednesday highlighted his philosophy on gold, saying: “Our thesis on gold over the longer term has been that our fiscal policy and our monetary policies don’t make any sense.” At current spending rates, the U.S. deficit-to-GDP ratio is expected to reach 6.7% by 2036, per the CBO. However, Einhorn also noted other major developed currencies maintain high deficit-to-GDP ratios, explaining why gold, as opposed to a foreign currency, could become the preferred global reserve.

Part of Einhorn’s confidence in gold is predicated on his belief that the Federal Reserve will issue more interest rate cuts than what’s currently anticipated. “I think one of the best trades out there right now is betting on more cuts this year than expected,” he said. “I think by the time we get to the end of the year, it’s going to be substantially more than two cuts.”

Yet even as January’s better-than-expected jobs report made the reality of another rate cut seem far away, Einhorn is betting that Kevin Warsh as Fed chair will be able to persuade the committee to tally up rate cuts.

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

This story was originally featured on Fortune.com