Ray Dalio on the Primary Reason to own Gold

Ray Dalio’s latest investment letter updates some of their macro positioning and offers some insights into the bull case for gold.  He writes:

“Gold is primarily an alternative to fiat currency and a storehold of wealth.  The main advantage that gold has over other currencies is that it can’t be printed.  While we have just gone through a period in which the degree of monetary stimulation has ebbed, the ongoing deleveraging means that developed economic will remain highly reliably on continued stimulation for years.  By the end of the quarter, central banks were starting to shift back toward renewed stimulation.  In addition, one of the primary disadvantages of gold relative to fiat currencies, that it doesn’t pay interest, is mitigated by low rates in the current environment.  Real interest rates are likely to remain very low and below real growth rates as a means of combating deleveraging and improving debt sustainability (as described in our “beautiful deleveraging” work).  As such, deleveragings strongly favor shifts from financial assets into gold and other tangible assets.

Gold is also being supported by secularly increasing demand. “

Read more at Hedge Fund Letters.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Tradeking13

    The main advantage that gold has over other currencies is that it can’t be printed.

    Yeah, but asteroids can be mined: http://www.reuters.com/article/2012/04/24/us-space-asteroid-mining-idUSBRE83N06U20120424

  • Anonymous

    Very silly comment. I’m not a goldbug nor a bug on anything, else but I appreciate any kind of asset when it is the right time to own it. This is a perfect environment for gold (but not for silver and platinum). Gold volatility is minimum when real interest rates are negative and are forecasted to be negative for many years to come. Exactly like now. And it happens that many really rich people hoarded gold in the recent months.

  • Guest

    I look forward to the days when mining gold from asteroids will be economically viable (because it means the price of gold will have shot to the moon).

  • http://None Pete

    Dalio is one of the very few independent thinkers. He put his money where his mouth is.

  • Andrew P

    It will be 100 years before a significant amount of gold is mined in asteroids, or anywhere else not on the earth. I won’t live that long, and neither will you.

  • Andrew P

    Well, you had better build yourself a time machine and teleport yourself forward on a one-way trip of 100 years or so, if you want to actually see spacecraft hauling tons of gold out of asteroids.

    And if you do build a time machine, you had better take all your wealth with you in precious metals, because any financial accounts you have will either be probated or escheated.

  • http://www.westcoastladybugs.com RUSS SMITH

    Hi!, Trade King 13 Et Al:

    How much gold recovery did you achieve from your latest astroid mining operation & pleae tell US the TRUTH & nothing but the TRUTH so help you GOD? Exactly how many tro ozs was that Trade King 13?

    RUSS SMITH, CALIFORNIA (One Of The Broke States)
    resmith@wcisp.com

  • http://www.westcoastladybugs.com RUSS SMITH

    Hi!, Patrons Of Pragmatic Capitalism Et Al:

    Let me see, Hmmmmm, the last asteroid I visited was in some past lifetime I can’t remember for the life of me & OH WELL!! I did tell my sister who believes in reincarnation though that I’m leavng everything I’ve earned here on Mother Earth to myself in my will; so that upon my return following my demise I don’t have to start all over again from scratch huh? However, how will that effect my life insurance policies when that time arrives why wouldn’t she tell me?

    RUSS SMITH, CALIFORNIA (One Of The Nations’ Broke States)
    resmith@wcip.com