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Eastern demand in buying gold (XAUUSD:CUR) has kept gold prices higher, said David M. Einhorn, founder and president of Greenlight Capital.
In a letter to investors, the American investor and hedge fund manager said that there has been a secular trend of Eastern investors buying gold (XAUUSD:CUR) from the West, and “perhaps the West is running out of gold to sell, and Eastern demand has remained strong enough to force the price higher.”
Gold’s (XAUUSD:CUR) price advanced more than 8% during the first quarter. Einhorn said that the rise was surprising because typical moves in currencies and interest rates would have produced a weaker quarter for it.
“While it’s possible, the advance was related to the market beginning to doubt the sustainability and wisdom of both monetary and fiscal policies.”
Greenlight Capital also established a medium-sized macro position in Teck Resources (TECK) to take advantage of higher copper (HG1:COM) prices.
“Our thesis was based on a combination of being bullish on copper (HG1:COM) and believing that Teck (TECK) was about to exist in the penalty box after a multi-year investment in a new copper mine that was on the brink of finally coming online,” he wrote.
After the mines came online “and the gap between supply and demand will like to open up in the next year,” Greenlight believes that the stock would be undervalued if copper (HG1:COM) prices rise, “but it less undervalued than it once was.”
Einhorn concluded that copper supply is about to fall short of demand, forcing prices substantially higher, and thinks the best way to invest is through options on copper futures (HG1:COM).
He also said that the U.S. economy was much stronger than most expected with markets that “largely ignored political and geopolitical concerns.”
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