Dalio Calls for Significant Increase in Gold Holdings

Ray Dalio, founder of Bridgewater Associates, has called on investors to significantly increase their gold holdings, raising its allocation to 5% to 15% of investment portfolios, citing the ongoing Iran war which is now in its ninth week and a notable rise in global uncertainty.

In an interview with CNBC on Monday, Dalio stated that in the current situation, gold serves as an important diversification tool, emphasizing that "gold is a currency, it is the oldest currency." He pointed out that gold is the second largest reserve currency in the world after the US dollar. This statement comes amidst a nearly 11% cumulative decline in gold prices since the outbreak of the Iran war, but it has still recorded an approximate 8% increase year-to-date.

The trajectory of the war remains unclear. The US-Iran negotiations that were scheduled to take place last weekend in Pakistan ended without any outcome, and there is no timetable for the next steps in the peace process. The Strait of Hormuz has been extensively blocked since the conflict erupted - despite a ceasefire agreement reached by both parties on April 8th - which accounted for approximately 20% of global seaborne oil shipments prior to the war. The US and international oil prices have surged nearly 70% since the beginning of the year.

Dalio has long advocated that investors hold gold, with his recommended allocation typically exceeding the market's commonly recommended 5% limit. He also expressed concern about the accelerating evolution of the global economic landscape, involving trends towards multipolarity, the rise of artificial intelligence, and the stagflation pressures faced by the United States.

The Strait of Hormuz as a Key Variable

Dalio lists the ultimate control of the Strait of Hormuz as one of the most critical uncertainties currently. Iran has indicated a desire to levy passage fees for the strait as one of the conditions of any peace agreement.

Meanwhile, internal pressures in the United States are building up - the rise in oil prices has increased travel costs, the summer tourist season is approaching, and the political calendar for the midterm elections is becoming increasingly imminent, all of which make Washington inclined to keep the conflict within a relatively limited scope. Dalio stated, "You want to exit this war as a winner," suggesting that policymakers face a narrowing time window.

Gold Under Pressure, Allocation Logic Continuously Strengthened

Although the direction of gold's movement during the war is unclear, and it has declined nearly 11% since the conflict began, Dalio believes that the current macro environment is conducive to gold allocation.

He cites several factors to support this judgment: a recent increase in international transactions settled in renminbi, the US's customary practice of influencing the global financial system through sanctions, and profound adjustments in global trade patterns are all eroding the dominant position of the US dollar system. "Transactions outside the dollar system are increasing," he said, "which is an environment favorable to gold."

Noteworthily, the ICE US Dollar Index fell to a four-year low earlier this year, but following the outbreak of the Iran conflict, the dollar regained its position as the market's first choice for risk aversion, exerting a certain degree of suppression on gold prices.

US Stocks Stabilize, "AI Will Exacerbate Wealth Inequality"

Despite the significant rise in oil prices, Dalio stated that the S&P 500 index has still risen about 4% since the beginning of the Iran war, which he views as reasonable given that US corporate earnings remain robust.

However, he also warned that the United States is stepping into a "stagflationary period," characterized by rising inflation alongside a weakening job market. He further noted that the world is accelerating towards multipolarity, with China vigorously promoting the transition to renewable energy. These structural changes, combined with geopolitical conflicts, form a complex backdrop that investors cannot ignore.

Dalio expressed a clear optimism towards artificial intelligence. He stated