World’s Biggest Hedge Fund Buying Gold

(August 30, 2017 - by Everett Millman)

One of the great things about owning gold is that anyone can do it from virtually anywhere in the world. It certainly has a democratizing impact on protecting one’s wealth.

However, in many instances, big movements in the gold market are attributed to the large-scale buying or selling by hedge funds. Sometimes referred to in the context of major firms and banks called “institutional investors,” hedge funds have the ability to move the market more than the average individual because they typically open very large positions when they trade or invest.

Now, the founder and manager of the world’s largest hedge fund is recommending that investors stock up on gold bullion.

Bracing for the Storm

Ray Dalio is one of the best-known names in investing circles. He is the founder and manager of Bridgewater Associates, which has more assets under its management (approximately $160 billion!) than any other firm in the wealth management industry. While his suggestions or predictions shouldn’t be taken as gospel, Dalio has a strong track record of identifying market trends.

Following the escalation of tensions between North Korea and its neighbors (who are backed by the U.S. and much of the West) last week, Dalio has begun recommending gold as a way to keep one’s portfolio protected from the greatest geopolitical risks.

When it comes to holding some gold “for a rainy day” (i.e. when you really need the money at the moment and your other investments aren’t especially liquid), Dalio basically implies that you don’t want to get caught off-guard in the event of a downpour.

Dalio presciently points out that “if the above things [global political risks] go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” He also points to the creeping possibility of a government shutdown in the coming weeks if Washington cannot reach an agreement on raising the debt ceiling.

However, Dalio admits that rather than make a specific bet on what will happen in the world, Bridgewater “aim[s] to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes.”

The same thinking should apply to your own portfolio!