On October 17th, Ray Dalio, the founder of Bridgewater Associates, published a detailed article on his LinkedIn account addressing a series of questions about gold and sharing his unique insights on the subject.

Dalio argues that most people mistakenly view fiat currency as money while overlooking gold's essence as the oldest form of currency. He emphasizes that gold, much like cash, does not yield real returns but possesses purchasing power and collateral value, especially pronounced during debt crises or fiat currency overproduction.

Unlike fiat money, gold cannot be printed at will, thus effectively hedging against devaluation risks, making it an ideal diversifying asset outside of stocks and bonds. On the subject of why gold was chosen over other precious metals or inflation-linked bonds, Dalio notes that gold's globally recognized monetary attribute and cultural foundation, coupled with the absence of credit risk, provide protection during systemic crises. In contrast, silver and platinum are heavily influenced by industrial demand, resulting in greater price volatility; inflation-linked bonds still remain a form of debt instrument, subject to risks of government default or data manipulation.

In terms of allocation advice, Dalio advocates that investors should allocate 10% to 15% of their portfolios to gold to optimize the risk-reward profile. He personally views gold as a “core holding” and uses moderate leverage to balance returns and risk control.

Furthermore, he points out that gold is gradually replacing some US Treasury bonds as a de facto “risk-free asset”, since its value is based on intrinsic worth rather than any entity's credit promise. Particularly in the current scenario, the market and economy are largely dependent on the performance of these AI-driven companies. If they underperform relative to market expectations, stock prices will fall.

These stocks have contributed to 80% of the gains in the US stock market, with the top 10% of income earners holding 85% of the positions, contributing to half of the nation's consumption. These AI companies account for 40% of this year’s economic growth in capital expenditure. A downturn would significantly impact individuals' wealth and the economy. Maintaining asset diversification is undoubtedly a prudent strategy.

Dalio's key insights on gold can be summarized as follows:

**Gold is Money** It is the most reliable foundational investment. **Q:** Your perspective on gold and gold prices seems different from most. How do you view gold? **Dalio:** You're right. I think most people's misconception is that they see gold as a metal rather than the oldest and most mature form of currency; they view fiat currency as money instead of debt, believing it can be printed indefinitely to resolve debt defaults. This stems from the fact that most people have never lived in an era where gold served as the base currency and have not studied the recurring cycles of “debt-gold-currency” across virtually all nations. Yet, anyone who has witnessed the evolution of "gold-money" and "debt-money" over time would hold a different view.

In my opinion, gold is like cash — it generates no value by itself but possesses purchasing power similar to cash which can underpin borrowing collateral. When businesses fail to repay loans and authorities attempt to resolve default crises by printing more fiat money, the value of non-fiat (gold) becomes prominent. So, for me, gold is money, akin to cash, but unlike cash, it won't be printed or devalued. When asset bubbles burst, or during wartime when parties refuse to accept each other's credit, gold becomes the ideal diversifying tool outside of stocks and bonds. Gold is not merely a metal; it represents the most robust foundational investment.

Gold functions like cash and short-term credit as money; however, cash and short-term credit can create debt, whereas gold can settle transactions — that is, it can complete payments without creating debt and can extinguish existing debts. In summary, I have clearly seen the relative supply-demand shift between “debt currency” and “gold currency” moving away from the former for some time. As for the fair price of debt currency relative to gold currency, it depends on their respective supply-demand ratios and the potential scale of any bursting bubble. I always prefer to keep a portion of gold in my portfolio, and I believe those who hold none or very little are making a mistake.

**Gold is the Most Unique and Effective Diversifying Tool** **Q:** Why gold? Why not silver, platinum, or other commodities, or something like inflation-linked bonds you’ve previously mentioned? **Dalio:** While other metals can serve as good inflation hedges, gold occupies a unique position in investors' and central banks' portfolios as a globally recognized, non-fiat medium of exchange and store of wealth, effectively diversifying risks associated with other asset classes and currencies.

Unlike fiat debt, gold carries no credit default or devaluation risks—in fact, it can mitigate these risks. Historically, when other assets hit rock bottom, gold tends to perform best—serving as a form of “insurance” within a diversified portfolio. Although silver and platinum share some similarities with gold, especially regarding industrial applications, their historical and cultural foundations as value storage fall significantly short of that of gold.

Although silver has served as a monetary standard in the past, it is highly influenced by industrial demand, which can lead to higher price volatility. Platinum, although valuable, has limited supply and specific industrial applications that restrict its monetary functions. Consequently, in terms of wealth preservation, these two metals do not hold the same level of universal acceptance and stability as gold.

Regarding inflation-linked bonds, during normal times (depending on the actual yields they offer), they are indeed excellent yet underrated inflation-hedging tools, and I believe more investors should consider them. However, they still represent a debt commitment. In the event of a major debt crisis, their performance is tied to the credit worthiness of the issuing government. They are also susceptible to government manipulation. Historically, politicians have manipulated inflation data and related terms to avoid high repayment pressures, causing it to become a common risk during high-inflation periods for inflation-linked bonds.

As for stocks—particularly those in high-growth sectors like artificial intelligence—there’s no doubt they possess substantial return potential, but after inflation adjustments, historical performance has proven poor. This is not only due to their limited inflation-hedging capabilities but also because, during severe downturns, both companies and the economy endure significant blows.

Overall, gold is the most unique and effective diversifying tool relative to other assets, and diversification itself is paramount. Therefore, gold should occupy a position in most portfolios.

**Maintain 10-15% Gold Holdings to Diversify Against AI Sector Bubble Risks** **Q:** At least artificial intelligence has immense upside potential, and debt instruments can still pay interest; however, gold seems stable, but situations could change if large holders, like banks, decide to sell off? **Dalio:** I can understand your reluctance towards gold. I'm not here to defend it (or any other investment); I just wish to share what I know about the mechanisms at play. When it comes to investing, I lean towards high diversification instead of betting on any single sector. Naturally, I adjust my portfolio according to my indicators and judgments—this has guided me to significantly increase my gold allocation for quite some time.

If you're interested in the underlying reasons, my book “The Changing World Order: Why Nations Succeed and Fail” discusses it more systematically. As for the alternative market you mentioned, like AI stocks: long-term appreciation of these stocks relies on the pricing of future cash flows, which entails enormous uncertainty; in the short term, it depends on the dynamics of the bubble.

We should heed historical lessons — every time breakthrough technologies emerge, related companies often become extremely popular. I'm not asserting these companies are in a bubble, but they do show many signs of being overvalued according to my bubble indicators.

Regardless, the current market and economy hinge greatly on these popular AI companies' performances. Should they underperform against market expectations, stock prices will fall. These stocks have accounted for 80% of the gains in the US stock market; the top 10% of income earners hold 85% of the positions and contribute to half of the consumption in the United States. Furthermore, capital expenditures for these AI companies represent 40% of this year's economic growth. A downturn could have grave implications for individual wealth and the economy. At this juncture, maintaining asset diversification is undoubtedly a prudent measure.

As for the observation about "debt instruments paying interest”: for these debt instruments to serve as genuine wealth storeholds, they must generate substantial after-tax real yields. However, there is immense downward pressure on real yields, alongside an oversupply of debt — debts are growing exponentially. Hence, we see funds shifting from bonds into gold, with the available supply of gold being relatively limited. Strategically, gold continues to be an effective diversification tool, and should individuals, institutional investors, and central banks allocate an appropriate share of their portfolios to gold for risk diversification, the price of gold will be much higher due to its finite quantity.

Ultimately, for me, I hope a portion of my portfolio includes gold, and for most investors, I believe around 10%-15% is optimal.

**Gold Prices Have Increased; Is It Still Worth Holding?** **Q:** Now that gold prices have risen, should I still hold it at this price? **Dalio:** For me, the simplest and most fundamental question everyone should ask themselves is: if I have no clue about the trends of gold and other markets, how much gold should I allocate in my portfolio?

In other words, from a strategic asset allocation perspective rather than a tactical bet, how much gold should I hold? Given gold's historical negative correlation with other assets (primarily stocks and bonds), particularly when stock and bond real returns are low, the answer is that an allocation of about 15% is optimal, providing the best risk-reward profile for the portfolio.

However, due to gold's lower long-term expected returns — just as cash yields are low (though it performs impressively in critical times) — this more optimal risk-reward portfolio comes at the cost of lower returns over longer periods. As I prefer a better risk-reward ratio without wanting to diminish expected returns, I treat my gold position as a “core holding” or slightly leverage my entire portfolio to achieve better risk-reward while maintaining the same expected return.

**Gold Becomes the De Facto “Risk-Free Asset”** **Q:** Has gold begun to replace US Treasury bonds as a “risk-free asset”? If so, can gold bear the weight of large-scale holding transfers? **Dalio:** Objectively speaking, yes, gold has indeed started to replace a portion of US Treasury bonds in many portfolios—especially in the asset allocations of central banks and large institutions—becoming a de facto risk-free asset. These institutions have relatively reduced their holdings in Treasury bonds while increasing their gold positions.

By the way, anyone with a long-term historical perspective would say that gold is genuinely the “risk-free asset” compared to Treasury bonds or any other fiat currency-denominated bonds. Gold is the most mature currency — in fact, it is currently the second-largest reserve asset held by central banks — and has proven to be considerably less risky than all government debt assets.

Historically and presently, debt assets represent the promise of a debtor to deliver currency to a creditor. This currency may sometimes be gold and at other times print-capable fiat money. Historically, when debts that need to be repaid exceed the available currency, central banks have printed money to repay debts, leading to currency devaluation.

When the currency is gold, they violate their commitment to repay with gold and instead repay with printed money; when the currency is fiat, they simply print more money. History tells us that the greatest risk lies with debt assets such as US Treasury bonds that may either default or devalue—most likely the latter. On the other hand, gold is a currency and wealth storage medium with intrinsic value, not reliant on any party's repayment promise, solely dependent on gold itself. It is an eternal and universal currency.

History also shows that since 1750, approximately 80% of currencies have disappeared, while the remaining 20% have experienced significant devaluation.