CNBC: Ray Dalio Says Gold Will Be a Top Investment During Upcoming Paradigm Shift for Global Markets

July 17, 2019

Article by John Melloy in CNBC

Hedge fund kingpin Ray Dalio is seeing a case for gold as central banks get more aggressive with policies that devalue currencies and push investors into more cash-like assets.

Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. As a result, too many people are holding these types of securities and likely to face diminishing returns.

“I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold,” the Bridgewater Associates leader said.

“Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier.”

“To me, it seems obvious that central banks have to help the debtors relative to the creditors. At the same time, it appears to me that the forces of easing behind this paradigm (i.e., interest rate cuts and quantitative easing) will have diminishing effects,” Dalio wrote.

“For these reasons, I believe that monetizations of debt and currency depreciations will eventually pick up, which will reduce the value of money and real returns for creditors and test how far creditors will let central banks go in providing negative real returns before moving into other assets.”

Dalio added that is uncertain of the timing for the shift but he thinks “it is approaching and will have a big effect on what the next paradigm will look like.”

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