Influential investor Ray Dalio says unchecked government spending and the consequent increase in US debt have notably hurt confidence in traditional currencies in 2025.
As fiscal imbalances deepen, he expects gold and decentralised currencies to outperform as stores of value.
At the annual FutureChina Global Forum, the founder of Bridgewater Associates urged investors to allocate roughly 10% of their portfolios to gold.
The metal’s growing role in global reserves and its resilience against currency depreciation could push its price up further through the remainder of this year.
Note that XAU/USD currently sits just below the $3,700 level.
Why is the US debt rising in 2025?
The US government is grappling with a widening fiscal gap driven by aggressive spending policies and persistent deficits.
According to Dalio, the government’s annual shortfall now exceeds $2 trillion, compounded by $1 trillion in interest payments and the need to refinance nearly $9 trillion in maturing obligations.
With limited appetite from global investors to absorb this scale of debt issuance, the imbalance between supply and demand is becoming acute.
President Donald Trump’s expansive tax-and-spending package is projected to add $3.4 trillion to the national debt over the next decade, further straining fiscal sustainability.
Experts warn that bipartisan reluctance to rein in spending has pushed the system toward a tipping point.
Why is rising US debt a tailwind for gold?
Gold’s appeal as a hedge against monetary instability is gaining traction as traditional currencies lose purchasing power.
Dalio emphasized that when governments overspend and accumulate unsustainable debt, their currencies tend to weaken – making gold a more attractive alternative.
In 2025, the US dollar index has already dropped over 10%, yet gold has appreciated even more sharply, outperforming most fiat currencies.
Investors are increasingly viewing gold not just as a commodity, but as a quasi-reserve currency.
Its scarcity, durability, and historical role as a store of wealth make it a natural refuge in times of fiscal uncertainty.
Central banks, too, are boosting their gold holdings, reinforcing its strategic importance.
Why is rising debt a tailwind for non-fiat currencies?
Ray Dalio also pointed to the growing relevance of non-fiat currencies – such as cryptocurrencies and digital assets – as alternatives to government-backed money.
When sovereign debt levels soar and fiscal discipline erodes, confidence in fiat systems tends to falter.
Non-fiat currencies, which operate outside centralized monetary frameworks, offer a decentralized hedge against inflation and currency debasement.
As the dollar’s dominance wanes, especially with the Chinese yuan gaining traction in global trade, digital assets are increasingly seen as viable stores of value.
According to the Bridgewater Associates founder, if governments continue to sidestep fiscal reform, investors will seek refuge in assets that are immune to political manipulation and monetary dilution.
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