Money & Markets - Dalio: A Recession Is on the Horizon so It is Time to Consider Gold

July 17, 2019

Article by JT Crowe in Money & Markets

Famed Bridgewater founder and CEO Ray Dalio is an expert when it comes to capital markets and well-versed in the machinations of the U.S. economy and Wall Street.

So when he talks, people listen, and Dalio has been warning more and more recently about growing economic risks and that a recession is on the horizon, and Dalio is now recommending people start shifting funds into gold to safeguard against incoming volatility.

“I think investors today are mostly leveraged long, meaning they own risky assets and have substantially leveraged those assets through company buybacks, private equity, and so on,” Dalio said during a recent discussion with Goldman Sachs Managing Director Allison Nathan. “In order to diversify against this — i.e. reduce exposure to leveraged long portfolios — investors should look to other stores of wealth and areas that have intrinsic diversification.”

Investors generally turn to cash to hedge their bets as things go south on Wall Street, Dalio said, but that’s not a good idea.

“People seem to think that going to cash reduces risk. But that’s only the case from a standard deviation perspective,” Dalio said. “When interest rates are negligible — below the inflation rate/nominal GDP growth — and you pay taxes on that, you’re not getting any return. Cash over the long run is the worst performing asset class, and therefore the riskiest asset class.”

So instead of letting inflation set fire your cash sitting in a low-interest savings account, Dalio said, take the leap and invest in gold.

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