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Manager of World’s Largest Hedge Fund Says Buy Gold

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Bridgewater Associates founder Ray Dalio said investors should buy gold.

Bridgewater manages about $160 billion in assets according to its website, and ranks as the worlds largest hedge fund.

In a LinkedIn post, Dalio wrote, “prospective risks are now rising and do not appear appropriately priced in.” He specifically cited geopolitical tensions, especially the war of words between North Korea and the United states, and the looming deadline for Congress to raise the debt ceiling.

The emerging risks appear more political than economic, which makes them especially challenging to price in. Most immediately, during the calm of the August vacation season, we are seeing 1) two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It’s hard to bet on such things, one way or another, so the best that one can do is be neutral to such possibilities.”

Dalio said he is “humble” when it comes to assessing political matters and didn’t make any predictions about particular events. But he emphasized the importance of staying liquid, diversified. and not becoming overly exposed to to any particular economic outcome.

We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so 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.”

The price of gold has surged as investors seek safe-haven amidst increasing geopolitical tensions. Gold was up about 1% this week and hit a 2-month high. Pres. Trump promised “fire and fury” if North Korea continues its threatening posture. The next day, he doubled down saying his warning wasn’t strong enough.

Commodities expert Dennis Gartman echoed Dalio sentiments during an interview on CNBC saying, “gold is about to break out on the upside strongly.” He advised having 10 to 15% of your portfolio in gold.

One never knows when geopolitical risks will arise. One never knows when something untoward will happen economically. So yes, you should have some part of your portfolio in [gold]. I think you should have a tad bit more than 5 or 10% at this point. The stock market looks a little vulnerable. The geopolitical circumstances are getting worse and worse. So, I think you probably need to bring that up to 10 to 15%, rather than 5 to 10.”

Gartman not only expressed concern about the saber rattling between the US and North Korea, but also inflationary pressures, and the fact that monetary authorities have been expanding supply reserves.

In an interview on RT, Peter Schiff also emphasized that it’s important to look beyond the political crisis of the day, and that we need to keep our eye on the Federal Reserve.

At some point, I do expect people to embrace gold. Not necessarily because of the geopolitical aspect, but because of the inflationary aspects, because people realize these fiat currencies  are going to lose a lot of purchasing power, that a lot of central banks are stuck at the zero bound, and even if they raise interest rates slightly, they’re going to lower them back down, and they keep doing quantitative easing. So, I think people will be drawn back to gold for the monetary properties it has had for centuries.”

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
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Photo by Bullion Vault via Flicker used under creative commons license.

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