Ray Dalio, billionaire investor and founder of hedge fund Bridgewater Associates, remains bullish on gold, recommending a 5-10% allocation in an investor’s portfolio to the bullion despite the sharp over 70% surge in prices in over a year.
Gold prices jumped to a record high in Tuesday’s trade (December 23) to a high of ₹1,38,381 per 10 grams on the MCX amid escalating US-Venezuela tensions and a decline in the dollar index. In the international market, too, gold rallied over 1% to trade just below $4,500 an ounce.
An individual and most investors should have between 5% and 15% of their portfolio in gold or an alternative money, Dalio told Nikhil Kamath in the latest episode of his WTF podcast on Sunday. When questioned if this allocation still holds despite the sharp surge in gold prices, Dalio’s answer was affirmative.
The 76-year-old investor said that we can get into the pricing of gold or what it might and might not do, but I need to hold that amount because that amount is the right amount.
What makes Ray Dalio bullish on gold?
Dalio said that though gold offers a low real return of about 1.2% a year, it is highly diversifying, which increases its appeal in the portfolio.
“Because when the other parts of the portfolio do very badly — because of certain things like stagflation or debt issues — then gold does very well,” the billionaire investor opined.
Dalio also raised red flags on the rising debt levels in the world, and against that backdrop, he prefers holding gold, thus making a case for allocation to the yellow metal in one’s portfolio.
“There’s too much debt, and we’re producing it too much. I’m not just looking at it in the United States, I’m looking at it in the UK and in France and in China and in most countries — we’re producing too much debt. That means I don’t want that kind of money. So because I don’t want that kind of money, I have been preferring the holding of gold to that kind of money,” Ray Dalio told Kamath.
Furthermore, he also said that gold is the only money that you can have, and nobody has to give you anything to have it. He said that gold is also a widely recognised store of wealth, which he can transport around the world and use. “And it’s particularly important in that it is not deflate — you can’t deflate its value,” he added.
Gold prices this year have been on a tear, rallying over 70%, helped by geopolitical tensions, trade worries, hopes of a US Federal Bank rate easing cycle and central bank buying.
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