If you’re an investor like me, you can’t be blamed for looking at last April’s returns and thinking things were all roses and daisies. After a scary tariff-induced 19% drop in the S&P 500, stocks rallied sharply from April lows. Nasdaq Comp and S&P 500 gained 50% and 36%respectively, in less than a year.
That’s impressive by any measure, but it probably created a problem.
Stocks are undoubtedly perfectly priced, even if trade wars erupted over the weekend amid new tariffs imposed on Europe. The rise in tensions over the past year is no surprise to the billionaire Ray Galiofounder of Bridgewater Associates, which manages 112 billion dollars in assets and is among the most successful hedge funds of all time.
Dalio has been beating the drum for the past year (I wrote more about it here ), arguing that the US mountain of debt is forcing a seismic shift in the global monetary order, prompting central banks to rethink their exposure to US debt against gold, the world’s second-largest reserve currency.
His concerns suggest an increasingly fragmented and distrustful global order, which he summed up in two words: “capital wars”.
These capital wars present real risks and consequences for investors.
The U.S. dollar’s reign as the world’s favorite reserve currency is under increasing pressure as trade wars discourage foreign central banks from buying U.S. debt, pushing Treasury yields higher.
“The monetary order is breaking down,” Dalio said in an interview with CNBC today. “Fiat currencies and debt as a store of wealth are not held by central banks in the same way.”
The fund manager buys and sells
Instead, central banks are rethinking their exposure as tensions and risks rise, causing even our allies to rethink their relationship with US bonds and the dollar.
“The biggest market that moved last year was the gold market,” Dalio continued. “At the other end of trade wars are capital wars.”
Gold prices are up in 2025, returning 66.2%, according to NYU Stern, far outpacing the S&P 500’s 17.8% return for the full year, including dividends. The trend continued in 2026 ETF SPDR Gold Shares (GLD). is up 10.3% year to dateincluding a Up 3.8% today following President Trump’s announcement of a new 10% tariff on European allies in an attempt to force support for his Greenland plans with NATO.
“Holders of US dollar debt and those who need it — the United States — are worried about each other,” Dalio said. “That’s a big problem … maybe there isn’t the same propensity to buy U.S. debt.”
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If so, then gold is the most likely beneficiary. We already saw a major increase in central bank gold purchases last year, and this is unlikely to change in 2026 if uncertainty continues to weigh on US debt financing.
Central banks and sovereign wealth funds are buying gold to diversify,” Dalio said.
US debt climbed above 38 trillion dollarsand it shows no signs of slowing down.
“When you have a certain amount of debt … and you have to sell a lot more, there’s a supply-demand problem,” Dalio said. “When you have conflicts, international geopolitical conflicts, even allies don’t want to hold each other’s debt. They’d rather go to a strong currency.”
Dalio calls it a logical reality that has repeated itself throughout history.
He believes gold has become attractive enough that Main Street investors should consider holding it as part of a diversified portfolio. Everyone’s situation is different, but Dalio generally suggests a allocation of 5% to 15%. to a “normal” portfolio because it “does really well when other assets don’t do well.”
He believes central banks should hold a higher percentage of gold than they currently do – Dalio’s personal positioning leans more towards gold than bonds, with holdings above his typical level.
Dalio is clearly a fan of gold, and I agree. His gold allocation makes sense to me, and his arguments are similar to what convinced me to make gold part of my own personal portfolio last November (for full disclosure, it’s 5.5% of my portfolio, the largest allocation I’ve had since I started investing in the early 1990s).
In short, owning gold does not mean avoiding stocks. It simply means that Dalio is balancing them less with bonds and more with gold than in the past.
Dalio isn’t the only person on Wall Street who thinks gold should be in portfolios because of the geopolitical and monetary context. TheStreet’s Charlie Blaine recently surveyed major banks and most said they expect gold to gain more ground in 2026.
Goldman Sachsfor example, he sees a path to gold reaching $4,900 an ounce this year.
“We still see upside risks to our base case that gold prices rise 14% to $4,900 by December 26 from a potential diversification extension to private investors,” Goldman Sachs wrote in a research note shared with me. “Central banks will continue to diversify further into gold to hedge geopolitical and financial risks.”
According to Goldman Sachs’ numerical analysis, gold ETFs make up just 0.17% of private financial portfolios, about six basis points, or 0.06%, below their peak in 2012. For every basis point that retail investors increase their allocation to gold, Goldman Sachs estimates that gold prices can rise by 1.4%.
If more individual investors increase their exposure to gold, as we did last year, then that could help support further gains this year, particularly if global turmoil continues to push central banks away from US Treasuries.
Change from 2025 close of $4,341.10 per troy ounce
Jefferies Group: $6,600, up 52.04%
The Yardeni Group: $6,000, up 38.21%
UBS: $5,400, up 24.39%
JPMorgan Chase: $5,055, up 16.45%
Charles Schwab: $5,055, up 16.45%
Bank of America: $5,000, up 15.18%
ANZ Bank (Australia): $5,000, up 15.18%
Deutsche Bank: $4,950, up 14.03%
Goldman Sachs: $4,900, up 12.57%
Morgan Stanley: $4,800, up 10.57%
Standard Chartered Bank (UK): $4,800, up 10.57%
Wells Fargo: $4,500 to $4,700, up 3.65% to 8.26% Note: Average is $4,600, a 5.3% gain.
Average: $5,180, up 19.3% Source: Wall Street/TheStreet research firms
Todd Campbell owns shares in the SPDR Gold ETF (GLD)
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This story was originally published by TheStreet on January 20, 2026, where it first appeared in the Investing section. Add TheStreet as a favorite source by clicking here.
