If you’re an investor like me, you can’t be blamed for looking at the returns since last April and thinking everything was roses and daisies. After a horrific, tariff-induced 19% drop in the S&P 500, stocks rallied sharply from April lows. The Nasdaq Comp and the S&P 500 rose 50% and 36%respectively, in less than a year.
That’s impressive by any measure, but it’s created a logical problem.
Stocks are valued at a premium even as trade wars flared over the weekend amid new tariffs in Europe. The rise in stress over the past year is no surprise to billionaires Ray GallioFounder of Bridgewater Associates, who manages $112 billion in assets and is one of 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 A mountain of debt Forcing a seismic shift in the global monetary system, prompting central banks to reconsider the riskiness of US debt relative to gold, the world’s second-largest reserve currency.
His concern suggests an increasingly fragmented and distrustful world order, which he summarizes in two words: “Capital War.”
Those capital wars pose real risks and consequences for investors.
The US dollar’s reign as the world’s preferred reserve currency is under increasing pressure as trade wars discourage foreign central banks from buying US debt, pushing Treasury yields higher.
“The monetary system is broken,” Dalio said in an interview with CNBC today. “Fiat currencies and debt as a store of wealth are not held equally by central banks.”
Fund managers buy and sell
Instead, central banks are rethinking their risk exposure as tensions and risks rise, leading our allies to rethink their relationship with US bonds and the dollar.
“The biggest market move last year was the gold market,” Dalio continued. “On the other side of trade wars are capital wars.”
Gold prices soared in 2025, returning 66.2%, according to NYU Stern, outpacing the S&P 500’s full-year return of 17.8%, including dividends. This trend has reached 2026 SPDR Gold Share (GLD) ETF is above 10.3% year-to-dateincluding a 3.8% increase today After President Trump made a new announcement 10% tariff In an attempt to force European allies to support his Greenland plans with NATO.
“Holders of U.S. dollar-denominated debt, and those who need it — the United States — are worried about each other,” Dalio said. “It’s a big issue … maybe there’s not the same inclination to buy U.S. debt.”
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If so, gold stands to benefit the most. We have seen a large increase in central bank gold purchases over the past year, and that is unlikely to change in 2026 if uncertainty continues to weigh on the financing of US debt.
Central banks and sovereign wealth funds are buying gold as diversification,” Dalio said.
The US debt pile has climbed higher $38 trillionAnd it shows no signs of slowing down.
“When you have a certain amount of debt … and you have to sell a lot, 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 debts. They prefer to go into hard currency.”
Dalio calls this a logical reality that has repeated itself over and over in history.
He thinks gold has become so attractive that Main Street investors should own it as part of a diversified portfolio. Everyone’s situation is different, but Dalio generally recommends it 5% to 15% allocation in a ‘normal’ portfolio because it “does very well when other assets do not.”
He believes central banks should hold a higher percentage of gold than they currently do—with Dalio’s personal position leaning toward gold rather than bonds, with holdings above his usual level.
Clearly, Dalio is a fan of gold, and I agree. His gold allocation makes sense to me, and his arguments are similar to those that convinced me to make gold part of my own personal portfolio last November (for full disclosure, it represents 5.5% of my portfolio, the largest allocation I started investing in in the early 1990s).
In short, owning gold does not mean avoiding stocks. This 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 backdrop. of The Street Charlie Blaine Major banks have recently been surveyed, and many have said they expect gold prices to rise in 2026.
Goldman SachsFor example, this year sees gold on its way to $4,900 per ounce.
“We still see downside risk to our base case from a possible extension of diversification to private investors with gold rising 14% to $4,900 by December 26,” Goldman Sachs wrote in a research note shared with me. “Central banks will diversify further into gold to hedge geopolitical and financial risks.”
Gold ETFs represent just 0.17% of private financial portfolios, down about six basis points, or 0.06%, from their 2012 high, according to Goldman Sachs’ number crunching. For every basis point that retail investors increase their allocation to gold, Goldman Sachs estimates that gold prices could increase by 1.4%.
If more individual investors increase their exposure to gold, as I did last year, that could help offset further gains this year, especially if global turmoil continues to push central banks further away from U.S. Treasury bonds.
A close change from 2025 to $4,341.10 per tro ounce
Jefferies Group: $6,600, up 52.04%
The Jordanian Group: $6,000, up 38.21%
UBS: $5,400, up 24.39%
JP Morgan 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, 3.65% to 8.26% Note: The average is $4,600, a gain of 5.3%.
Average: $5,180, up 19.3% Source: Wall Street Research Firms/The Street
Todd Campbell owns shares in the SPDR Gold ETF (GLD).
Related: IMF issues bleak warning on US economy
This story was originally published by TheStreet on January 20, 2026, where it first appeared in the Investing section. Add TheStreet as a preferred source by clicking here.
