Despite recent pressure on gold prices, which fell significantly on Monday to a near two-week low, billionaire investor and Bridgewater Associates founder Ray Dalio continues to advise investors to allocate around 15% of their portfolios to alternative currencies like gold or Bitcoin.
This recommendation stems from his renewed stern warning about global economic health, citing unsustainable levels of government deficit spending.
Gold faced downward pressure from a strong U.S. dollar index and a slight uptick in U.S. Treasury yields, while improved risk appetite in the broader market further weakened demand for the safe-haven metal. Specifically, August gold futures fell $27.50 to $2,310.90 per ounce, and September silver futures edged down $0.07 to $28.29.
Over the weekend, the U.S. and the EU agreed on a trade deal where the EU will face 15% tariffs to avoid escalating trade tensions. Separately, the South China Morning Post reported that the U.S. and China are expected to extend their tariff truce by three months. This news precedes trade talks between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng in Stockholm, Sweden.
Concurrently, the Federal Reserve’s policy meeting this week is widely anticipated to maintain current interest rates, though expectations for rate cuts in the autumn are strengthening.
Dalio pointed out that the U.S. government collects approximately $5 trillion in annual revenue but spends $7 trillion, resulting in a 40% deficit rate, with accumulated debt now six times its income. He warned that the credit system functions like a circulatory system delivering purchasing power to different economic sectors. When debt, debt service payments, and interest rates persistently rise, they squeeze out other economic expenditures like plaque in blood vessels, ultimately triggering an “economic heart attack”
These remarks coincide with U.S. government debt surpassing $37 trillion. To sustain deficit spending, the U.S. may need to issue nearly $12 trillion in Treasury bonds next year. Dalio stated, “We are at the point of no return,” asserting that the government’s only choice is to borrow more and rely on central banks to print money. He also cautioned that risk indicators like emergency capital controls are flashing warning signals.
Beyond the U.S., Dalio emphasized that all Western economies face similar crises: akin to the 1970s or 1930s, these economies will collectively decline. Consequently, all fiat currencies will depreciate relative to hard currency—specifically, gold. Earlier this year, gold surpassed the euro to become the world’s second-largest reserve currency.
Besides gold, Dalio views Bitcoin as an attractive monetary asset but stressed it hasn’t reached gold’s status, primarily because central banks are unlikely to adopt it as an official reserve asset. While he couldn’t definitively assess Bitcoin’s efficacy as money, he acknowledged it is widely perceived as an alternative.
Dalio concluded that the core objective is holding assets that protect against broad-based currency depreciation, stating “the real crisis lies in currency devaluation.” Hence, he recommends a neutrally balanced portfolio include 15% allocation to gold or Bitcoin. He personally prefers gold and holds it alongside a small amount of Bitcoin.
