Ray Dalio has issued a warning that, against a backdrop of mutual distrust between European and American capital, the risk of funds being weaponized is imminent. Gold will be the ultimate safe haven, with its value determined not by short-term price fluctuations, but by its role in diversifying portfolio risk.
Legendary investor Ray Dalio warned on Tuesday that the world is on the brink of a capital war, fueled by escalating geopolitical tensions and heightened volatility in capital markets.
Speaking in an interview with CNBC's Dan Murphy at the World Government Summit in Dubai, Dalio stated that the globe is teetering on the edge of a capital war—a scenario where capital is weaponized, and nations engage in strategic competition through measures like trade embargoes, blocking capital market access, and leveraging debt holdings.
"We are on the brink," Dalio said, "This means we are not yet in a capital war, but we are very close to it; and due to mutual concerns among the parties, we are highly susceptible to crossing that threshold and descending into the quagmire of a capital war."
He cited the recent escalation of tensions triggered by the Trump administration's push to bring Greenland, a Danish territory, under U.S. control as evidence supporting this view.
Dalio cautioned that European investors holding dollar-denominated assets are growing "concerned," fearing they might face sanctions; while "the U.S. side will also have corresponding concerns, worrying about losing capital inflows from Europe, or that Europe will cease increasing its holdings of U.S. assets."
According to Reuters, citing research data from Citigroup, European investors accounted for 80% of total overseas purchases of U.S. Treasury bonds from April to November last year.
"Capital, money, is the key," Dalio said on Tuesday. "Now we are seeing capital controls being implemented around the world, and it remains unknown who will be affected. So we are indeed on the brink—this does not mean we are currently in a capital war, but rather, it is a logical point of concern."
Since returning to the White House last year, U.S. President Trump has imposed a series of punitive tariffs on trade partners and political rivals, while also repeatedly reversing related measures. These volatile decisions have triggered significant turbulence in financial markets.
Dalio added that, historically, capital wars often involve measures such as foreign exchange controls and capital controls; institutions like sovereign wealth funds and central banks are already making "preparations" to deal with such controls.
Dalio pointed out that, looking back at history, capital wars often revolve around major conflicts. He noted that during the buildup before the U.S. entered World War II, America imposed sanctions on Japan, a time when the "adversarial relationship" between the two nations was intensifying.
"One can imagine that a similar situation could arise in the world today, and even multiple national leaders have speculated and discussed the issue of interdependence between the U.S. and Europe—because the other side of a trade deficit is capital flow; there is a global capital imbalance, and capital could be used as a weapon of war."
Gold Remains the Top Hedge Tool Despite a historic sell-off recently causing a broad decline in precious metals, Dalio stated that in the current tense climate, gold remains the best option for storing capital. As of Tuesday, gold and silver were showing signs of recovery.
When asked if recent price volatility casts doubt on gold's status as the safest capital haven, Dalio said, "The value of gold is not changed by a single day's price action."
"The price of gold is up about 65% from a year ago and down about 16% from its all-time high. I think people often make a mistake: they get caught up in the short-term ups and downs of the gold price and hesitate about whether to buy," Dalio said.
"Instead, central banks, governments, or sovereign wealth funds should perhaps consider: what should the allocation of gold be in my portfolio, and maintain that fixed allocation—because gold is a highly effective risk-diversification tool for other underperforming asset classes in the portfolio."
Dalio added, "Precisely because gold diversifies risk, it performs exceptionally well during economic downturns and crises; while its performance is relatively muted during prosperous economic upswings, it remains an effective risk diversifier. I would say the most important thing is to build a well-diversified investment portfolio."
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