Billionaire investor and Bridgewater Associates founder Ray Dalio has reaffirmed his strong recommendation for holding gold, advising individuals to allocate 5% to 10% of their investment portfolio to the precious metal. This advice comes even as gold prices have witnessed a dramatic surge of over 70% in the past year, reaching unprecedented levels.
Gold Soars to Record High Amid Global Tensions
On Tuesday, December 23, domestic gold prices on the Multi Commodity Exchange (MCX) skyrocketed to a historic peak of ₹1,38,381 per 10 grams. This rally was driven by escalating geopolitical tensions, particularly between the US and Venezuela, coupled with a weakening US dollar index. In the international markets, the trend mirrored with gold gaining over 1% to trade just under the $4,500 per ounce mark.
Why Dalio's Gold Advice Stands Firm
During a recent appearance on Nikhil Kamath's WTF podcast, the 76-year-old investing legend was asked if his recommended gold allocation still made sense after the metal's sharp price appreciation. Dalio's response was a clear and confident yes. He emphasized that while one could debate the short-term pricing of gold, holding that specific percentage is fundamentally sound for portfolio health.
Dalio elaborated that an individual and most investors should ideally have between 5% and 15% of their portfolio in gold or an alternative form of money. He justified this stance by highlighting gold's unique role as a powerful diversifier.
The Core Reasons Behind the Bullish Stance
Dalio pointed to two primary factors driving his bullish outlook on gold:
First, he underscored gold's effectiveness as a hedge during periods of economic distress. "Because when the other parts of the portfolio do very badly — because of certain things like stagflation or debt issues — then gold does very well," Dalio explained. Despite offering a relatively low real return of about 1.2% annually, this diversifying quality significantly enhances its appeal.
Second, and more critically, Dalio raised major red flags concerning the soaring debt levels across the global economy. He expressed deep concern, noting excessive debt creation not just in the United States, but also in the UK, France, China, and most other nations. "There’s too much debt, and we’re producing it too much... That means I don’t want that kind of money. So because I don’t want that kind of money, I have been preferring the holding of gold to that kind of money," he told Kamath.
Gold's Unique Attributes as Money
Dalio further championed gold's intrinsic properties, describing it as the only form of money that requires no counterparty promise. "Gold is the only money that you can have, and nobody has to give you anything to have it," he stated. He added that its universal recognition as a store of wealth, portability, and its immunity to devaluation through inflation ("you can’t deflate its value") make it particularly valuable in the current financial landscape.
The remarkable rally in gold this year, exceeding 70%, has been fueled by a confluence of factors including persistent geopolitical tensions, trade uncertainties, expectations of interest rate cuts by the US Federal Reserve, and robust buying by central banks worldwide.
Disclaimer: This article is for informational purposes only. The views and recommendations expressed are those of the individual analyst. Investors are advised to consult certified experts before making any investment decisions, as market conditions are dynamic and individual circumstances vary.
