When Ray Dalio, founder of the largest hedge fund in the world, posts on LinkedIn, people read every word – even if there are more than 7,000 of them. Dalio, who is co-chief investment officer and co-chairman of the hedge fund Bridgewater Associates, observed in the post that he has spent “roughly 50 years being a global macro investor” and, as a result, is perfectly positioned to identify pending shifts in the global markets and structure a portfolio so as to be “largely immune to them.”
Given the fund has nearly $125 billion under management and has been in operation since 1975, it seems like a good bet to start listening when its co-CIO starts talking about making changes to your portfolio to protect yourself from major market upheaval.
In his post, Dalio observed that several trends are creating the beginnings of one such “paradigm shift.”
Citing central bank policies toward printing money, the Fed’s apparent shift toward “a new zero-bound interest rate” policy, and negative interest rates in Europe, Dalio recommended firmly readers begin buying up gold.
“I believe it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio,” he wrote, adding, “I believe that gold is an effective portfolio diversifier.”
Dalio went on to say the “best ‘risky investments’ will continue to be equity and equity-like investments,” including a traditional safe-haven investment vehicle, real estate, on his list in the event that the real estate is leveraged.
He added that most investors tend to be underweighted in gold and precious metals in their portfolios anyway, “meaning that if they just wanted to have a better-balanced portfolio to reduce risk, they would have more of this sort of asset.”
The Bridgewater Associates co-chairman wrote his initial post in mid-July, and his predictions have already begun to play out. In early August, trade and tariff policies between China and the United States once again pushed the yellow metal to six-year highs, with gold prices breaking previous highs in multiple currencies.
The British pound, the Japanese yen, and the Canadian and Australian dollars all hit record highs, while other currencies showed huge 3 percent rallies.
“Currencies that are not considered safe-haven on the world marketplace would be seeing more demand for gold due to holders of those currencies being extra nervous,” observed Kitco senior technical analyst Jim Wyckoff of the upward momentum.
Multiple analysts also predicted forex traders would likely exit their home markets for gold, and analysts said the European Union and Great Britain could both face recessions soon. In that event, demand for gold in those countries and, by extension, the price of gold everywhere, would likely climb even higher.