“A substantial disconnect has developed between the price of gold and the mining companies,” Einhorn said during a conference call.
Einhorn sold the gold ETF (GLD) and moved into the Market Vectors Gold Miners ETF (GDX). The top three holdings of this ETF are Barrick, Goldcorp and Newmont.
“With gold at today’s price, the mining companies have the potential to generate double-digit free cash flow returns and offer attractive risk-adjusted returns even if gold does not advance further,” Einhorn said. “Since we believe gold will continue to rise, we expect gold stocks to do even better.”
Einhorn has held a position for several years. The first reports of his gold holdings were in 2008.
“Given the challenging macroeconomic environment, we intend, for the foreseeable future, to continue holding a significant position in gold and other macro hedges in the form of options on higher interest rates and foreign exchange rates, short positions in sovereign debt and sovereign credit-default swaps,”