Gold and Power Transitions: Why Invest in Gold, According to Ray Dalio?
- ccancino3
- 5 days ago
- 3 min read
Updated: 2 days ago
Gold has proven to be a safe haven in times of economic crises and geopolitical changes. Ray Dalio, one of the most influential investors in the world, explains in his book The Changing World Order why gold remains an essential asset in the face of global instability and weakening fiat currencies.
The Changing World Order
What is a Power Transition?
In the historical and geopolitical context, a power transition occurs when a dominant nation, empire, or economic bloc loses global influence and is replaced by another emerging actor. This phenomenon not only implies a change in political or military leadership, but also a profound transformation in the economy, the hegemonic currency and international institutions.
As an example, after the Second World War, the United Kingdom gave its position as a dominant power to the United States, which also implied the transfer of economic leadership and the consolidation of the dollar as a global reserve currency. Today, as Ray Dalio warns, we could be witnessing a new transition of power in the world, with the rise of China and the loss of strength of the US dollar. During these periods, traditional assets tend to become volatile, whereas gold has proven to be a reliable store of value.
The Debt Cycle and the Decline of Dominant Currencies
Dalio analyzes the concept of Long-Term Debt Cycle, nations accumulate debt for decades until they reach unsustainable levels. To correct these imbalances, they usually resort to massive money printing, causing the depreciation of their currencies. This historical process has weakened dominant currencies such as the Dutch guilder, the British pound, and currently threatens the hegemony of the US dollar. As Dalio states, "Money and credit are not wealth; they are simply means to obtain wealth".
Gold: A Store of Value in Times of Instability
During major transitions of power, Gold has maintained its position as a neutral asset. Unlike government-controlled currencies, gold cannot be arbitrarily devalued, thus providing a solid store of value. “When world leaders lose their status, so does their currency.”, the investor highlights. This is why investing in gold provides protection against inflation, the debt crisis, and political uncertainty, acting not only as an emotional refuge, but as a tangible support of wealth lasting for centuries.
Diversification: The Role of Gold in a Resilient Portfolio
Dalio promotes the strategy All Weather, designed to build portfolios resistant to any economic environment. Within this strategy, he recommends assigning a minimum of between 5% and 10% of the portfolio to gold holdings. The objective is to balance risk in scenarios of recession, inflation, growth and deflation, since gold is not directly correlated with traditional assets such as stocks or debt bonds.
Are We Facing the End of the Era of the Dollar?
In The Changing World Order, Dalio warns about the rise of China and the relative weakening of the United States. Factors such as the rising public debt, social polarization and loss of competitiveness are classic signs of an empire in decline. At the same time, central banks from emerging economies are increasing their gold reserves, reducing their dependence on the US dollar. This trend points to a potential change in the international monetary system.
Preparing for this new scenario is not a sign of pessimism, but rather an act of strategic prudence. As Dalio recalls, “don't think it can't happen just because it hasn't happened in your life.”
Incorporate gold to investment strategies is today more than a conservative decision: an intelligent response to the structural changes the world is experiencing.
Protect Your Savings
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