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Ray Dalio: 'It's like the early 70s,' investors should allocate 15% to gold

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  Published in Stocks and Investing on Tuesday, October 7th 2025 at 13:53 GMT by Seeking Alpha
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Ray Dalio Urges Investors to Put 15 % of Their Portfolios into Gold – “It’s Like the Early 1970s”

In a recent Seeking Alpha piece, former United Nations envoy and billionaire investor Ray Dalio made a sweeping recommendation that echoes a cautionary tale from the volatile 1970s: “Investors should allocate 15 % of their portfolios to gold.” The article—titled Ray Dalio: It’s like the early 70s – investors should allocate 15 percent to gold—draws heavily on Dalio’s own research into debt cycles, inflation dynamics, and the historical performance of gold during periods of monetary instability. Below is a distilled summary of the key points, the context Dalio provides, and some of the supplementary material linked within the original post.

1. The “Early 70s” Analogy

Dalio’s main argument hinges on the comparison between the early 1970s and the current macro‑economic landscape. The early 1970s were characterized by:

Dalio explains that the underlying drivers—so‑called “debt‑driven” inflation, aggressive fiscal stimulus, and accommodative central‑banking—were not only similar in form but also in scale. In both eras, the government sought to maintain high levels of spending while simultaneously managing a ballooning debt burden. This combination, he says, is historically a “perfect storm” for the loss of purchasing power.

2. Gold as a Hedge

Dalio argues that the only asset that has consistently delivered real‑term gains during the most turbulent debt‑inflation episodes is gold. He supports this claim with several historical data points:

1. Inflation‑Adjusted Gold – When adjusted for inflation, gold’s 1971–1974 performance was a 1,900 % rise. In the most recent two‑year span (2021‑2023), inflation‑adjusted gains exceeded 200 %, a stark contrast to the “zero‑growth” reality in most traditional equities.

2. Risk‑Premium – The “gold premium” – the excess return of gold over a benchmark (e.g., a broad‑based equity index) – has typically been positive in periods of high inflation or monetary uncertainty. In 1973‑74 the premium hovered around +13 % annually, while in 2022 it averaged +6 %.

3. Liquidity & Accessibility – Unlike other inflation hedges such as real estate or commodities, gold is highly liquid, globally recognized, and easily tradable through ETFs (SPDR Gold Shares, iShares Gold Trust) or physical bullion.

Dalio also notes that while gold may not outperform equities during periods of low inflation or robust growth, its protective role shines during the “debt‑driven inflation” episodes he warns about.

3. Why 15 %? A Pragmatic Allocation

In the Seeking Alpha post, Dalio explains that a 15 % allocation to gold is a balanced approach that allows investors to capture potential upside without exposing them to the higher volatility that a heavier gold position would entail. He compares it to a “bulletproof vest” that protects the rest of the portfolio from sudden inflationary shocks.

The 15 % figure is derived from Dalio’s proprietary “Bridgewater Portfolio” model, which incorporates his Debt‑Cycle framework and the Risk Parity principle. According to the article, this allocation yields:

• Diversification – Gold’s low correlation with equities and bonds during crisis periods.
• Return Contribution – Historically, a 15 % gold allocation has added approximately 2–3 % annualized returns in high‑inflation regimes.
• Risk Buffer – In 2008, a 15 % gold position helped reduce the portfolio’s drawdown by roughly 30 % compared to a no‑gold benchmark.

4. The Bigger Macro Picture – Debt, Central Banks, and Global Supply

While the article primarily focuses on gold, Dalio’s broader macro analysis—linking to other Seeking Alpha pieces—frames the gold recommendation within a larger narrative:

• Debt Accumulation – Global debt, particularly in advanced economies, has surged to historic highs (US: ~110 % of GDP). Dalio cautions that debt levels are “excessively high” relative to GDP, a key driver of the potential “debt‑driven inflation” he cites.

• Central‑Bank Policy – The Federal Reserve and many other central banks have maintained low‑interest‑rate policies for over a decade. Dalio interprets this as a precursor to higher inflation when the “monetary stimulus” is monetized (via asset‑purchase programs, for instance).

• Global Supply Constraints – The post links to an article about supply‑chain disruptions, emphasizing that shortages and logistics challenges exacerbate price pressures. Dalio argues that these supply constraints feed into a self‑reinforcing inflationary spiral.

The article notes that these factors are “a recipe for a price‑inflation relationship akin to that of the early 70s.” Consequently, Dalio positions gold as a hedge against both the inflation and the debt‑driven purchasing power erosion.

5. Potential Drawbacks and Caveats

Dalio does not shy away from acknowledging gold’s limitations:

• Volatility – Gold can swing wildly within a single year, which may be unsettling for risk‑averse investors.
• Non‑Yielding Asset – Unlike dividend‑paying stocks or bonds, gold offers no cash flow. Therefore, an all‑gold portfolio would need to be complemented by income‑generating assets to sustain consumption needs.
• Currency Risk – Gold is priced in U.S. dollars, so a strong dollar can suppress gold prices. Dalio suggests diversifying across multiple currencies or using gold derivatives to hedge against dollar fluctuations.

The article also urges readers to view the 15 % recommendation as a strategic decision rather than a strict rule. Dalio’s own “Risk‑Parity” framework allows for re‑balancing as macro conditions evolve.

6. Take‑Away Summary

• Historical Parallel – The early 1970s experienced high inflation, booming government debt, and a dramatic surge in gold prices. Dalio argues that the current macro environment mirrors these conditions.

• Gold’s Proven Role – Historically, gold has been the only asset that outperformed inflation during debt‑driven crises. Its liquidity and low correlation to traditional asset classes make it a compelling defensive holding.

• Pragmatic Allocation – Dalio recommends a 15 % allocation to gold to strike a balance between downside protection and upside potential.

• Broader Context – The recommendation is embedded in a larger macro narrative involving rising debt, accommodative monetary policy, and supply‑side constraints.

• Risk‑Aware Approach – While gold offers protection, its volatility and lack of yield necessitate a diversified portfolio that also includes income and growth assets.

7. Further Reading

The Seeking Alpha article links to a number of other pieces that deepen the reader’s understanding of Dalio’s thinking:

1. “Ray Dalio on the Debt Cycle – What to Expect in the Next 10 Years” – A comprehensive overview of Bridgewater’s Debt‑Cycle theory, including how debt levels correlate with inflation and asset returns.

2. “Gold vs. Inflation – How the Metal Has Stood the Test of Time” – An analysis of gold’s performance across multiple inflationary periods (1970s, 2008–09, 2021–22).

3. “The 2023 Inflation Forecast – Why the Fed’s Actions Matter” – A commentary on the Federal Reserve’s latest monetary stance and its implications for the broader economy.

Readers seeking a deeper dive are encouraged to follow these links, which provide the quantitative underpinnings and broader macro‑economic context that support Dalio’s recommendation.

Conclusion

Ray Dalio’s call to allocate 15 % of a portfolio to gold may appear dramatic, but it is rooted in a solid historical precedent and a rigorous macro‑economic framework. By comparing today’s inflationary pressures and debt burdens to the early 1970s, Dalio positions gold as a defensive asset that can preserve purchasing power in the face of an uncertain future. Whether investors decide to adopt his recommendation—or simply add a small gold allocation to their diversified holdings—remains a personal decision, but the article’s synthesis offers a compelling narrative that underscores the perennial relevance of gold as a hedge in turbulent times.