Billionaire investor Ray Dalio recently warned that President Trump’s aggressive political and trade stance could lead to a new phase of global financial tension. Speaking to CNBC at the World Economic Forum in Switzerland, Dalio said that trade wars can easily spill over into what he calls “capital wars.” In simple terms, he explained that foreign governments and investors may become less willing to buy U.S. debt if confidence in the U.S. weakens.
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Dalio, who founded Bridgewater Associates, said that this risk is growing because both sides are becoming uneasy. Countries that hold large amounts of U.S. dollars and Treasury bonds may worry about political and economic stability, while the U.S. continues to issue large amounts of new debt. If trust erodes on either side, that imbalance could become a serious problem. He added that, historically, these situations often escalate into disputes over capital flows and currencies, even among allies.
Due to those risks, Dalio emphasized the importance of diversification. More specifically, he cautioned investors against relying too heavily on any single country or asset class and pointed to gold as a key hedge during periods of stress. This is because gold often performs well when other assets struggle, according to Dalio. As a result, he suggested making it between 5% and 15% of a typical portfolio.
Is Gold a Good Buy?
Using TipRanks’ technical analysis tool, the indicators seem to point to a positive outlook for gold (GLD). Indeed, the summary section pictured below shows that 13 indicators are Bullish, compared to four Neutral and five Bearish indicators.
