Billionaire hedge fund manager Ray Dalio is warning that global tensions are shifting beyond traditional geopolitical conflicts and entering a new era where money itself becomes a weapon. The Bridgewater Associates founder said the world is not just facing a cold war or trade war, but a looming “capital war” in which nations could use financial leverage to pressure rivals. Dalio made the remarks during an interview at the World Governments Summit in Dubai, cautioning that escalating political and economic tensions could disrupt global markets and investment flows.
Dalio described a scenario where countries could attack each other by controlling the flow of capital, particularly through debt ownership and financial sanctions. Such financial warfare, he warned, could create severe market instability and alter how investors and governments manage their money.
“We Are on the Brink,” Dalio Says
Dalio emphasized that the global system is dangerously close to crossing a threshold into financial conflict. “We are on the brink,” Dalio said. “That means not in, but it means we are quite close to [a capital war], and it would be very easy to go over the brink into a capital war, because there are mutual fears.”
He noted that rising distrust between global economic powers is increasing the likelihood of retaliatory financial actions. This environment, Dalio suggested, creates vulnerabilities for countries that rely heavily on foreign investment and global capital markets.
Trump’s Greenland Proposal Adds to Global Tensions
Dalio attributed part of the escalating discord to President Donald Trump’s recent threats to take over or purchase Greenland from Denmark. Analysts have suggested the move strained NATO alliances, potentially unsettling long-standing economic partnerships between the U.S. and Europe.
According to Dalio, these tensions could spark concerns among European investors who hold significant amounts of U.S. securities. He warned that fears of sanctions or political retaliation could discourage European capital from flowing into U.S. financial markets, creating what he called “reciprocal fear” that the United States might lose access to critical foreign funding.
Warning of a Breakdown in the Global Monetary Order
Dalio has issued similar warnings in recent months, including remarks at the World Economic Forum in Davos. He believes the world is entering a phase in a larger economic cycle where the United States’ dominance is gradually weakening.
A key factor behind this shift, Dalio said, is America’s mounting national debt, which has reached approximately $38 trillion. He warned that excessive debt levels, combined with geopolitical tensions and rapid technological changes, are accelerating instability in the global financial system. “Let’s not be naive and say, ‘Oh, we’re breaking the rule-based system,’” he said. “It’s gone.”
Markets Enter “Sell America” Mode
Global markets have already shown signs of concern. After Trump pushed forward with his Greenland ambitions, investors began pulling back from U.S. assets, triggering what some analysts described as “Sell America” behavior. The shift weakened the U.S. dollar and drove up yields on five-year Treasury bonds, signaling investor anxiety about government borrowing and fiscal stability.
European institutional investors played a major role in this shift. Danish pension fund AkademikerPension announced it would exit U.S. Treasuries, citing concerns that American government finances were no longer sustainable. Swedish pension fund Alecta also reduced its exposure to U.S. debt holdings.
European Investors Hold Massive Influence Over U.S. Assets
European investors are particularly important to U.S. financial markets. According to Citi data, they accounted for roughly 80% of foreign purchases of U.S. Treasuries between April and November 2025. Any pullback from these investors could significantly impact U.S. borrowing costs and the stability of government funding.
Dalio warned that geopolitical tensions could lead foreign investors to reconsider their exposure to U.S. assets and bonds, particularly if sanctions or financial retaliation become more common tools of international policy.
Capital Wars Often Accompany Broader Conflicts
Dalio pointed to historical precedent, arguing that financial conflict often accompanies military or geopolitical confrontations. He cited the United States freezing Japan’s assets during World War II as an example of how economic tools can be used to exert global influence without direct military force.
He said today’s geopolitical environment shows similarities, particularly in the evolving relationships between the United States, China, and European nations. The increasing use of sanctions, tariffs, and financial controls, Dalio suggested, reflects early signs of the type of capital warfare he fears.
Dalio Says Gold Remains the Safest Asset
Against this backdrop, Dalio said gold remains the safest asset for investors seeking protection from financial turmoil. “In reserve currencies, gold is the second largest reserve currency,” Dalio said. He added monetary policy-makers would still call gold “the safest money in this kind of environment.”
Despite recent volatility in precious metals markets, Dalio argued that gold’s role as a safe haven remains intact. He stressed that gold’s long-term value lies in its independence from government policies and currency fluctuations.
Gold’s Performance and Recent Market Volatility
Gold has experienced significant price swings recently but remains strong overall. “Gold is up about 65% from a year ago, and down about 16% from its high,” Dalio said. “I think people make the mistake of thinking, is it going to go up and down, and should I buy it?”
The metal reached an all-time high of $5,608.35 in January before falling amid Federal Reserve-driven dollar strength. However, buyers returned quickly, and gold remains nearly 8% higher month-over-month, demonstrating sustained investor demand.
Wall Street Forecasts Continued Gold Gains
Several major financial institutions remain bullish on gold’s long-term outlook. J.P. Morgan forecasts gold reaching $6,300 per ounce by the end of 2026, implying nearly 28% upside from early February 2026 levels. Wells Fargo Investment Institute predicts a similar range between $6,100 and $6,300.
Other banks share optimistic projections, including UBS, which sees gold reaching $6,200 per ounce, Bank of America projecting $6,000 by spring 2026, and Goldman Sachs forecasting $5,400 by the end of 2026. These targets reflect growing expectations that geopolitical and fiscal uncertainty will continue supporting gold prices.
Dalio Draws Parallels to the End of the Gold Standard
Billionaire hedge fund manager Dalio compared the current environment to 1971, when President Richard Nixon ended the gold standard. During the early 1970s, rising inflation, heavy government spending, and growing debt weakened confidence in the U.S. dollar, boosting demand for gold as a financial hedge.
He suggested today’s combination of high debt levels, currency risks, and geopolitical tension mirrors that period. As a result, Dalio believes investors should treat gold as a strategic long-term safeguard rather than a short-term trade.
Gold as Insurance in a Fragile Financial System
Dalio stressed that gold’s primary role is not to outperform during prosperous periods but to provide stability during crises. “Because gold is a diversifier, when the bad times come along it does uniquely well, and when the good times are prosperous, less so, [but] it’s an effective diversifier,” Dalio said on Tuesday. “I’d say the most important thing is [to] have a well-diversified portfolio.”
He reiterated his long-standing recommendation that investors allocate between 5% and 15% of their portfolios to gold. Dalio had popularized the all-weather portfolio. In a world increasingly shaped by debt pressures, geopolitical tension, and weaponized capital flows, Dalio argues gold functions more as financial insurance than a speculative investment.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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