Gold: A Historical and Central Bank Preference

Dalio stressed that gold serves as a long-term store of value. Unlike purely speculative assets, gold has historically played a strategic role in central banks’ reserves. Dalio pointed out that past efforts to address economic problems by printing money are no longer as effective, making gold’s limited supply and irreplaceable nature a critical factor in maintaining its value over time.

“You cannot print gold at will,” Dalio noted, emphasizing that central banks acquire gold deliberately to safeguard their positions amid global economic uncertainty. Gold’s stability, he argued, clearly separates it from traditional currency and underscores its role as a reliable reserve asset.

Why Bitcoin Differs from Gold

Dalio argued that comparing Bitcoin to gold is misleading. Gold’s uniqueness comes from being a singular, finite resource. In contrast, Bitcoin, as a digital asset, behaves more like technology stocks, with price dynamics heavily influenced by market sentiment and innovation cycles. Dalio also highlighted potential privacy concerns with Bitcoin, noting that its fully transparent nature differentiates it from gold in a meaningful way.

Additionally, Dalio mentioned that advances in quantum computing could pose a theoretical risk to Bitcoin. Central banks, he believes, are unlikely to adopt Bitcoin as a reserve asset in the same manner as gold, further distancing it from the “digital gold” narrative.

Global Shifts and Geopolitical Change

Dalio also reflected on the evolving global order. He observed that U.S.-led dominance is weakening and older powers are giving way to emerging players, signaling a period of geopolitical transformation. Investors, Dalio suggests, need to recognize these structural changes when considering the relative security of assets like gold versus the speculative nature of Bitcoin.

The takeaway is clear: while gold continues to serve as a historically proven safe haven, Bitcoin remains a volatile, technology-driven investment, better understood as part of the broader risk portfolio rather than a direct substitute for gold.

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Ray Dalio: “Gold Rally Could Begin”

Dalio argues that the Fed’s latest communication, framed as a technical balance-sheet adjustment, is in reality a more meaningful pivot. Citing Chair Jerome Powell’s statement that reserves will eventually need to grow in line with the banking system and the broader economy, Dalio stresses that the scale of upcoming liquidity injections will be crucial.

He notes that if balance-sheet expansion coincides with interest-rate cuts and rising fiscal deficits, the result resembles a coordinated monetary-fiscal effort to absorb government debt. Dalio characterizes this as a familiar pattern in which central banks effectively monetize deficits — a dynamic he warns can contribute to asset bubbles.

The Case for a Gold Rally

According to Dalio, central-bank bond purchases create liquidity and suppress real interest rates. Where this liquidity flows ultimately determines market behavior. When it stays within financial assets, prices tend to rise, risk spreads narrow, and gold historically gains value.

Dalio points out that periods of rising inflation and currency debasement typically support gold’s performance. With fiat supply expanding far more rapidly than the supply of gold, he argues that the metal often strengthens as investors seek stability amid monetary erosion.

And What About Bitcoin?

While Dalio focuses primarily on gold, his analysis has clear implications for Bitcoin. Former BitMEX CEO Arthur Hayes has already suggested that the Fed is engaging in a form of “stealth quantitative easing,” injecting liquidity into markets through mechanisms like repo facilities. Hayes believes this process could ignite Bitcoin’s next bullish cycle, asserting that the crypto asset responds quickly to shifts in dollar liquidity.

Despite this optimism, Dalio cautions that excessive liquidity can inflate speculative bubbles — a warning that adds nuance to the more aggressive predictions circulating in crypto circles.

Both Dalio and Hayes agree on one point: the Fed’s move toward easier financial conditions will be a decisive force across global markets. Whether Bitcoin rallies alongside gold or takes a more volatile path remains a key question investors will be watching closely.

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Dalio said, “For the best return and risk balance, 15% of the investment should be in gold or Bitcoin.” However, he emphasized his preference for gold over Bitcoin. He stated that he personally holds “some Bitcoin,” but the amount is small. 

Dalio highlighted the economic risks posed by the growing debt burden in the US. “The value of the currency is rapidly eroding,” he warned. The US Treasury may need to issue nearly $12 trillion in new bonds next year. This issue affects other Western countries as well, creating a “debt vicious cycle” globally. Dalio predicted a downturn similar to economic crises in the 1970s and 1930s. 

Therefore, he noted that valuable assets like gold and Bitcoin act as “effective diversifiers” during crisis periods. Investors can reduce risks by balancing their portfolios with these assets. 

US Debt Crisis and Dalio’s Investment Strategy 

The latest US Treasury report shows nearly $1 trillion in new borrowing in Q3, $453 billion more than previous estimates. For Q4, a borrowing expectation of $590 billion exists. Thus, the US government continues to cover budget deficits through debt. 

Dalio said other Western countries face similar “debt traps” and their currencies will lose value. In this process, “stable value” assets like gold and Bitcoin will stand out. Dalio also mentioned Bitcoin is a newer, digital alternative to gold but remains skeptical about its acceptance as a reserve currency. 

The US may need to issue $12 trillion in bonds next year to roll over its debt. The problem is the currency losing value… Other Western countries face the same situation and will suffer more severely. Bitcoin and gold will continue to gain value against their currencies. 

Dalio believes governments won’t adopt Bitcoin as a reserve currency due to its transparent transaction structure and lack of privacy. Still, Bitcoin plays an important role in portfolio diversification. 

Current Performance of Gold and Bitcoin 

As of July 2025, Bitcoin trades around $118,100, about 4% below its all-time high of $123,230 on July 14. Gold has also reached new historical highs in recent months. Dalio’s portfolio advice increases the appeal of these two assets for investors. Ultimately, Dalio recommends increasing allocations to gold and Bitcoin in portfolio management.

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