Why Ray Dalio Suggests that Investors Hedge Their Risks with Gold



Ray Dalio recommends gold

Ray Dalio, the chairman and chief investment officer at Bridgewater Associates, recommends that investors hedge their risks, with gold forming at least 5%–10% of their portfolios. In his Linkedin post, he discussed the risks of the rising geopolitical tensions between the US and North Korea, as well as the possibility of a US default if the debt ceiling is not raised. 

Dalio noted, “Prospective risks are now rising and do not appear appropriately priced.” He also mentioned that if the above two factors go the wrong way, gold would benefit more than other safe-haven assets such as the US dollar, the yen, and Treasuries.

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John Paulson’s gold holdings

Billionaire hedge fund manager John Paulson held 4.36 million shares of the SPDR Gold Shares ETF (GLD) at the end of June 2017, which is unchanged from his position on March 31, 2017.

Jeffrey Gundlach’s views

Jeffrey Gundlach, billionaire investor and DoubleLine Capital CEO and chief investment officer, is watching the copper-to-gold ratio. In an interview with CNBC, he said that when this ratio is rising, it might suggest that something else is going on that could be inflationary. Investors generally prefer gold (GLD) (RING) during times of global unrest because it’s considered a safe-haven asset while copper is considered a key industrial metal. Copper performs well when economic activity picks up.

The rising copper-gold ratio suggests that demand for copper is increasing, which is boosting prices. The rising demand for the key industrial metal signals that economic activity may be picking up, which would create an inflationary situation.

Gundlach also shared his views during the 2017 Sohn Investment Conference in May, where he suggested that gold prices could face “another leg up.”

Hedge funds’ interest in gold could help the sector overall, boosting miners such as Barrick Gold (ABX), Goldcorp (GG), AngloGold Ashanti (AU), and Newmont Mining (NEM).


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