The legendary Ray Dalio of Bridgewater Associates has been more than willing to share his knowledge with the world via televised sitdowns and written works. Undoubtedly, the man is perhaps best known, not just for landing impressive returns over time but for managing risks incredibly well. Many new investors might neglect the risk management aspect, especially in the early days, and that makes Dalio an invaluable voice to follow.
It’s not a mystery as to why someone like Ray Dalio might be fond of an asset like gold, especially amid rising geopolitical risks, which the broad stock market has since shrugged off. With oil prices eclipsing $110 per barrel again without upsetting markets, which are sitting at new highs, questions linger as to whether it still makes sense to maintain a risk-on approach just because others are more inclined to think the Iran war will resolve itself in a timely manner.
Gold can help defend a portfolio against a slew of different risks. Maybe 15% in gold isn’t excessive.
Of course, the future is unknowable, and just because the herd is willing to pile back into markets as though the crisis in the Middle East never happened does not mean investors should ignore the slate of risks that are still very much on the table. Undoubtedly, Dalio, who’s been an advocate for a well-diversified portfolio and an “all-weather” approach to investing, recommends an allocation as high as 15% in gold.
That might seem quite high for some, especially considering most investors are under-invested in the asset. For those who aren’t gold bugs, an allocation in the 5-10% range might be the next best thing.
With the threat of rising inflation and soaring energy prices, I’d argue that Dalio’s recommendation isn’t at all aggressive. In fact, I think the 10-15% range should be a standard for portfolios looking to hedge against currency devaluation and geopolitical chaos. The precious metal also stands out as a terrific diversifier beyond bonds, especially as the traditional 60/40 portfolio model comes into question.
Dalio once compared America’s high debt load as akin to “plaque in a clogged circulatory system.” That’s a fantastic analogy. And while a sprinkle of gold (let’s say 5% or so) might seem like enough, I do think it might be too small a dose, especially for investors who want a portfolio that can better hold up from a global shock. Of course, the right allocation to gold is up for debate.
Gold’s recent 2026 roadbump doesn’t change much
With the asset coming off an incredible 2025 and a choppy, less-rewarding (at least so far) 2026, perhaps now could be a great time to revisit gold and how it could add some shine (in the form of greater diversification) to one’s holdings. My favorite ways to play are the Sprott Physical Gold Trust (NYSE:PHYS) for physical exposure and the SPDR Gold Shares (NYSEARCA:GLD | GLD Price Prediction) for simplicity.
Although gold reacted quite negatively during the Iran war, I do think that the asset remains a very unique diversifier that can actually do well once Dalio’s warning of a “capital war” looks to take hold. In my view, Dalio isn’t being alarmist with such views. In many ways, the trade war is evolving into more of a capital war.
Even for investors who aren’t overly concerned with the risks (whether it be inflation, the rise of a capital war, or the mounting levels of “plaque” in the system), gold is still a pretty solid asset that can return a decent deal over time. Of course, you won’t get a dividend, but what you will get is appreciation over time and an asset that can give lift to your portfolio when all else tumbles. Gold, along with silver, is in a rough patch right now.
As investors digest last year’s gains, my guess is that patient investors stand to do well by diversifying into the shiny yellow metal on weakness. The asset is still up close to double in the past two years. Despite more recent choppiness, that’s still far better than the S&P 500, which is up close to 44% over the timespan.
The bottom line
As stocks consider their next move and the central bank gold-buying picks up momentum again, my guess is that the metal’s epic run isn’t over quite yet. Though I could be wrong, I expect great things from the asset for the next two to three years, as investors grapple with a new slate of risks that call for a new kind of portfolio diversifier.
Some see 15% in gold, an unproductive asset, as aggressive. But I think it should be the new standard. Perhaps once the risks Dalio outlines become better recognized by investors, we’ll see gold regain its shine.
