Ray Dalio Sees 1970s-Like Risks, Recommends Higher Gold Holdings for Investor Stability

Imagine your savings are like a sturdy house — gold is like the strong, metal lock on the front door, keeping your wealth safe when storms hit. That’s why many investors are talking about gold right now.

Why Is Gold in the Spotlight?

Ray Dalio, who started one of the world’s biggest hedge funds, says people should think about putting up to 15% of their investments in gold. This advice comes as gold prices have soared above $4,000 an ounce, breaking records.

Dalio believes gold is a great way to protect your money, especially when the usual parts of your investment plan — like stocks and bonds — are having a tough time. He says, “Gold does very well when the typical parts of the portfolio go down.”

This is important for investors because gold often rises when people get nervous about the economy or when there’s a lot of uncertainty in the world. In 2024, gold prices have jumped more than 50% as people worry about things like government debt and world conflicts.

Why Some Experts Love Gold (The Bull Case)

• Safe Haven: Gold tends to hold its value when other assets, like stocks, are falling.
• Inflation Hedge: When prices for everything else go up, gold has historically kept up. In the 1970s, for example, gold prices soared during high inflation (Investopedia).
• No Counterparty Risk: You own gold outright — you’re not depending on a company or government to pay you back.
• Diversification: Adding gold can help balance out your portfolio, lowering risk.
• Expert Support: Not just Dalio, but Jeffrey Gundlach, another big investor, suggests putting up to 25% of your portfolio in gold if you’re worried about inflation or a weak dollar.

Why Some Experts Are Cautious (The Bear Case)

• No Income: Gold doesn’t pay you interest or dividends like stocks or bonds do.
• Volatility: Gold prices can swing up and down quickly, which can make some investors nervous.
• Long-Term Growth: Over very long periods, stocks have usually outperformed gold in terms of overall returns (New York Times).
• Traditional Advice: Most financial advisors say to keep gold and other commodities to just a small part of your portfolio — usually less than 5% — because of these risks.

What’s Different Now?

Dalio compares today’s situation to the early 1970s, when high inflation and government debt made people lose trust in paper money. Back then, gold became a popular way to protect savings. He says, “When there’s a huge supply of debt, it’s not a good way to store wealth.”

That’s why some experts suggest a bigger slice of gold in your investments — especially if you’re worried about inflation, debt, or global problems.

What the Data Says

Historically, gold has done best in times of high inflation and market stress. According to a study by the World Gold Council, gold’s average annual return during high inflation years was about 15%, compared to just over 6% during normal years (World Gold Council).

Investor Takeaway

• Consider adding gold to your portfolio, but think about what percentage fits your goals and risk level. Dalio suggests up to 15%, but most advisors recommend less.
• Remember that gold doesn’t pay income — it’s mainly for protection, not for growing your money fast.
• If you’re worried about inflation or world events, gold can help balance your portfolio.
• Don’t ignore stocks and bonds — over the long run, they usually help your savings grow the most.
• Stay informed and review your investments regularly to make sure you’re ready for whatever comes next.

For the full original report, see CNBC