Is Now the Time to Heed Dalio’s Gold Allocation Advice?

Ray Dalio’s love for gold

Ray Dalio’s love for gold is well known. His hedge fund, Bridgewater Associates, maintained its stake in the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust ETF (IAU) during this year’s third quarter despite lower gold prices, at 3.91 million and 11.31 million shares, respectively.

Is Now the Time to Heed Dalio’s Gold Allocation Advice?

Dalio’s conviction in gold

Bridgewater Associates didn’t have any major positions in gold ETFs until the second quarter of 2017, when the fund made its first purchases, of $68.1 million in GLD and $36.8 million in IAU. In the third quarter of 2017, Dalio went on a gold-buying spree. At the end of the third quarter, the fund’s fourth-largest position was in GLD—it had grown by a whopping 595% sequentially to $473 million.

Dalio also suggests buying gold for diversification and as an inflation hedge. He believes that because gold performs well when inflation is high or growth is declining, it tends to diversify overall risk in your portfolio. He recommends that investors’ portfolios comprise 5%–10% gold. In a LinkedIn post last August, he wrote, “If you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this. Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this.” As fear has taken over for investors and market uncertainty increases, investors might do well to allocate a part of their funds to gold—previously, we wrote that policy, trade, growth, and margin concerns could drive investors to gold.

Dalio’s gold mining stakes

In the third quarter, Bridgewater Associates increased its exposure to precious metal miners (GDX) Barrick Gold (ABX), Goldcorp (GG), Kinross Gold (KGC), Franco-Nevada (FNV), and Newmont Mining (NEM). The fund, however, decreased its stake in Randgold Resources (GOLD), Royal Gold (RGLD), AngloGold Ashanti (AU), Yamana Gold (AUY), and Eldorado Gold (EGO), among others.