Ray Dalio: Gold is a shield against the debt risks of the United States

Ray Dalio, the founder of Bridgewater Associates, has issued a warning that the increasingly heavy debt burden in the United States is pushing its markets to the brink of risk. He suggests that investors consider gold as a hedging tool to guard against potential systemic crises.

Recently, Dalio compared the rising debt servicing costs in the U.S. to plaque clogging blood vessels, pointing out that this will "crowd out other expenditures" and could lead to a "heart attack."

He recommends that 10% to 15% of a well-diversified investment portfolio should be allocated to gold. This perspective comes at a time when the U.S. stock market is hitting new highs due to cooling inflation data and expectations of interest rate cuts.

Bill Winters, CEO of Standard Chartered Group, who participated in the discussion, stated that although the valuations in European markets are not as high as those in the U.S., they face similar situations:

"The UK and France are in similar positions, but the market has imposed stricter constraints on them than on the U.S."

Under the Debt "Heart Attack" Alarm, the Safe-Haven Value of Gold

The core of Dalio's warning lies in the ever-expanding debt and its servicing costs in the U.S. At a launch event for the upcoming Abu Dhabi Finance Week in December, he stated, when a country spends more money to repay its debt, it inevitably squeezes other necessary government expenditures, a process akin to plaque accumulating in the human circulatory system:

"Doctors would warn that this could lead to a heart attack."

Dalio sold his remaining shares in Bridgewater in July this year and stepped down from the hedge fund he co-founded.

In response, he provided the hedging suggestion of gold. He explained that gold has a low correlation with other asset classes, and its value often rises against the trend during crises when other assets decline.

Dalio believes that in a world filled with "debt" and escalating geopolitical tensions, investors should reflect on "whose money you are holding?" when constructing a neutral investment portfolio. He provided specific asset allocation advice, stating that gold should account for 10% to 15% of a well-diversified investment portfolio.

As of Wednesday's close, thanks to lower-than-expected inflation data and widespread expectations of a rate cut by the Federal Reserve next week, the S&P 500 and Nasdaq Composite indices have risen over 11% and 13% respectively this year, both hitting record highs.

However, other market observers have also recognized similar potential risks. Bill Winters of Standard Chartered believes that economies like the UK and France also face debt issues similar to those in the U.S., but the capital markets have already imposed more apparent constraints on them, suggesting that the U.S. market may not have fully digested its own long-term fiscal risks yet