Ray Dalio, the billionaire investor, is holding on to gold as a hedge against the potential risks of rising inflation and a looming debt crisis.

What Happened: Dalio, the former CEO of Bridgewater Associates, has highlighted the escalating debt levels globally, with the U.S. debt reaching a record $34 trillion this year in a LinkedIn post. He also pointed out the debt issues faced by China, Japan, and European countries, which pose significant risks to their currencies.

“History and logic show that when there are big risks that the debts will either 1) not be paid back or 2) be paid back with money of depreciated value, the debt and the money become unattractive,” Dalio wrote.

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Dalio also warned that when nations are heavily indebted, central banks are likely to print more money to pay off the debt, leading to devaluation of the currency, i.e., inflation. He added that gold, as a non-debt-backed form of money, is a good diversifier against high debt levels.

Gold has been on a record-setting run recently, with investors turning to the precious metal amid fears of a recession and persistent inflation. Dalio has previously warned of a potential debt crisis in the US, which could trigger a balance sheet recession.

In the early months of 2024, global markets have experienced considerable volatility. Certain gold ETFs have demonstrated notable returns during this period. For instance, ProShares Ultra Gold UGL has yielded a year-to-date return of 29.17%, while GraniteShares Gold Trust BAR and SPDR Gold Trust GLD have provided returns of 15.40% and 15.26% respectively, based on data from Benzinga Pro.

Why It Matters: Dalio’s decision to hold onto gold as a hedge against inflation and debt crisis is in line with his previous warnings about the global economic landscape. In March, he cautioned that China could face a “lost decade” if it doesn’t address its debt issues.

Despite these warnings, he remained bullish on China’s stock market and suggested that the most opportune moment to invest is when markets are deeply unpopular and undervalued, a situation he sees in the current Chinese equity market.

Despite the potential risks, Dalio’s investment strategy seems to be paying off. In the past week, gold has been on a record-setting run, with investors turning to the precious metal amid fears of a recession and persistent inflation.

Price Action: As of now, the spot price for gold stands at $2,368.73 per ounce, reflecting a decrease of $23.20, or 0.97%. Meanwhile, gold futures for June 2024 are trading at $2,383.3, indicating a decline of $30.5, or 1.26%, according to the data from Bloomberg.

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Photo courtesy: World Economic Forum On Flickr

This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.


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