For years, Bridgewater founder Ray Dalio has expressed concerns about the value of government bonds and fiat currencies—and how these concerns enhance gold's appeal. Since Dalio first articulated these views, gold prices have surged significantly. Recently, Dalio reiterated his stance, stating that gold is a currency—one that is least prone to devaluation or confiscation—a fact beyond dispute. This is precisely why gold has been regarded as money for thousands of years across nearly all nations, while many other currencies have long vanished.
At the time of Dalio’s latest commentary, gold had just hit a historic high of $4,380 per ounce before retreating sharply, though it remains up roughly 50% year-to-date. The rally has been driven by sustained central bank purchases and the so-called "currency debasement trade," where investors shun sovereign bonds and fiat currencies amid widening fiscal deficits.
Below are Dalio’s historical and contemporary arguments for gold’s enduring value:
Historically, all currencies have been either asset-backed (pegged to hard assets) or fiat. Asset-backed currencies derive their value from limited-supply, globally recognized precious metals like gold or silver, allowing holders to exchange paper money for physical assets at fixed rates. Fiat currencies, however, are unbacked by any tangible asset, with no constraints on supply.
Examining monetary history, whenever a gold standard faced excessive debt, the system collapsed. The reason: If authorities honored gold convertibility, it led to debt defaults and deflationary depressions; if they abandoned convertibility, they could print money freely, typically triggering currency devaluation, soaring inflation, and rising gold prices. Before central banks emerged (1913 in the U.S.), deflationary paths were more common; afterward, inflationary responses dominated. Both scenarios precipitate major debt crises, ultimately resolved by inflating away debt burdens through higher price levels.
Recent gold standard breakdowns occurred in 1933 and 1971. Since the shift to pure fiat in 1971, studying historical fiat systems under debt overloads becomes especially relevant. In such cases, central banks invariably print copious money and credit, fueling inflation and gold’s ascent. Across all examples, gold—as an alternative to paper/debt currencies—outperformed, maintaining purchasing power over the long term better than any other asset, hence its status as central banks’ second-largest reserve holding.
This isn’t to claim other currencies always underperform gold as wealth stores. Since paper/debt currencies earn interest while gold does not, holding cash may yield higher returns when rates adequately compensate for devaluation risks. For those timing markets (which Dalio discourages), paper currencies are preferable when interest rates offset depreciation risks; otherwise, gold is the choice.
An alternative strategy is perpetual gold allocation—both gold and cash offer similar real returns (~1.2%), yet they’re negatively correlated, making a combined holding adaptable to varying liquidity environments.
Gold’s low confiscation risk further distinguishes it. It relies on no third-party payment promise, is harder for individuals or governments to seize, and is the only currency fully self-custodiable and immune to cyberattacks. Thus, during financial crises prompting high taxes/confiscation policies or escalating trade/geopolitical wars, gold emerges as the go-to asset.
Put simply, gold’s value surges during monetary/debt crises and wars precisely because confiscation risks rise. More accurately, gold’s value lies in its "refusal to devalue." This is why gold endures as the foundational currency: Over millennia, it has proven its synchronization with changes in the cost of living.