Gold Just Crossed $4,200 per Ounce. Here's How Much You Should Buy, According to Hedge Fund Legend Ray Dalio.

Source Motley_fool

Key Points

  • Gold is a widely recognized store of value, so it's a popular hedge against inflation and economic uncertainty.

  • The yellow metal has surged by 58% this year, beating every major U.S. stock market index.

  • Ray Dalio, the founder of Bridgewater Associates, thinks investors should allocate an unusually high percentage of their portfolios to gold right now.

  • 10 stocks we like better than SPDR Gold Trust ›

Gold has been considered a store of value for thousands of years. Today, it also has some industrial applications in semiconductors and devices because of its high electrical conductivity, and it remains a staple in the jewelry industry.

Gold has rocketed to a whopping 58% return so far in 2025, as investors race to hedge against elevated inflation and soaring government debt. It's outperforming every major stock market index on the year, and it's even beating powerhouse artificial intelligence (AI) stocks like Nvidia. The shiny yellow metal just hit a new record high of $4,200 per ounce, and it's showing no signs of slowing down.

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Ray Dalio is the billionaire founder and former CEO of Bridgewater Associates, a top hedge fund known for consistently delivering returns in all market environments. When speaking at the Greenwich Economic Forum earlier this month, he said investors should park an unusually high portion of their portfolios in gold right now. Is it time to heed his advice?

A stack of gold bars sitting on top of American dollars.

Image source: Getty Images.

Gold is the ultimate hedge against a growing money supply

Gold is a scarce precious metal, and it's quite difficult to mine, which means very little new supply hits the market each year. In fact, just 216,000 tons have been extracted from the ground throughout history, compared to billions of tons of other commodities like coal and iron ore.

Gold also can't be controlled by any one country. It's stored as a reserve in most central banks throughout the world, so there is a clear consensus about its legitimacy as a store of value. In fact, many governments used to peg their domestic currencies to the value of gold, including the U.S. until 1971.

Under the gold standard, a country needed to have enough physical gold to match its currency reserves, which limited the amount of new money its government could print, thus keeping inflation under control. Since the U.S. abandoned the gold standard five decades ago, money supply has exploded, resulting in a decline in the U.S. dollar's purchasing power of over 90%.

The below chart shows how closely the value of gold (relative to the U.S. dollar) has tracked the enormous increase in money supply:

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

The U.S. national debt is currently $37.6 trillion (and climbing), and the budget deficit in fiscal 2025 alone (which ended on Sept. 30) was an eye-popping $2 trillion. Investors are betting the dire fiscal situation can only be resolved by devaluing the U.S. dollar even further through the expansion of money supply, so they are aggressively hedging with gold.

Ray Dalio's unusual gold recommendation

Ray Dalio is a student of history, which is a key reason for his success as a hedge fund manager. He regularly warns about the consequences of reckless government spending, and he likens the current situation to the early 1970s when soaring inflation, spending, and debt destroyed confidence in paper currency.

Financial advisors have wide-ranging opinions when it comes to buying gold. Some believe it should make up no more than 5% of an investors' portfolio, because it typically underperforms earnings-producing assets like stocks. However, in light of the present fiscal situation in the U.S., Dalio recommends investors park a sizable 15% of their portfolios in the yellow metal.

I'm not sure I agree. While it might be tempting to chase gold's eye-popping 58% return this year, it's worth noting certainly the yellow metal has averaged a more conservative annual gain of around 8% for the last 30 years, underperforming the benchmark S&P 500 (SNPINDEX: ^GSPC) stock market index.

Gold also has a tendency to deliver flat returns for lengthy periods of time -- had you bought it in June 2011, for example, you'd have earned nothing for almost an entire decade. The stock market was up 144% over the same period:

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

In other words, gold might be borrowing some returns from the future right now, which could lead to another long period of poor performance in the years ahead. But that doesn't mean investors should avoid it completely.

Buying gold has never been simpler

Before investors go out and buy gold bars, they might want to consider a much simpler alternative. Physical gold requires secure storage and insurance, and it's difficult to sell quickly in a pinch. But an exchange-traded fund (ETF) like the SPDR Gold Trust (NYSEMKT: GLD) can solve those problems, because it can be bought and sold instantly through a regular investment account just like any stock.

The SPDR Gold Trust is fully backed by real gold reserves, but owning shares won't entitle investors to any physical metal. They can still capture all of gold's upside through the ETF, but they won't receive delivery of any gold bars in the event of an apocalypse.

Plus, the ETF has an expense ratio of 0.4%, meaning an investment of $50,000 will incur an annual fee of $200. For most people, that's probably still cheaper than storing physical gold.

In summary, despite the minor drawbacks I outlined above, buying an ETF like the SPDR Gold Trust is probably the simplest and most convenient way for most investors to add gold to their portfolios.

Personally, I think a smaller portfolio allocation than Dalio's recommended 15% might be the way to go, considering there are so many other high-growth investment opportunities up for grabs right now, particularly in the artificial intelligence space.

Should you invest $1,000 in SPDR Gold Trust right now?

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*Stock Advisor returns as of October 13, 2025

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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