Ray Dalio warns that the world is on the brink of a capital war

Legendary investor Ray Dalio warned Tuesday that the world is “on the brink” of a capital war amid heightened geopolitical tensions and volatile capital markets.

Speaking to CNBC’s Dan Murphy at the World Government Summit in Dubai, Dalio said we are close to entering the territory of capital warfare when money is weaponized through measures such as trade embargoes, blocking access to capital markets or using debt ownership as leverage.

“We’re on the edge,” Dalio said. “That doesn’t mean no, but it does mean we’re close to (a capital war) and it would be very easy to cross the line into a capital war because there’s mutual fear.”

He pointed to the recent escalation of tensions with the Trump administration Click on it Greenland – Danish territory – to be controlled by Washington.

He warned of “fear” of possible sanctions among European holders of US-denominated assets, and “there may be a mutual fear from the US of not being able to get capital or buying (from Europe),” he said.

According to Citi research, 80% of foreign purchases of US Treasuries between April and November were made by European investors. was quoted Reuters agency.

“Capital, money, issues,” Dalio said Tuesday. “We’re seeing capital controls… happening all over the world today and it’s questionable who will experience it. So we’re on the borderline — that doesn’t mean we’re (now in a capital war), but it’s a logical concern.”

Since returning to the White House last year, U.S. President Donald Trump has stepped back and forth from a series of punitive tariffs on trade partners and political opponents. These decisions caused volatility in the financial markets.

Dalio said that capital wars have historically been driven by measures such as currency and capital controls, and that institutions such as sovereign wealth funds and central banks are creating “dreams” to prepare for such controls.

Historically, as Dalio points out, capital wars have evolved around “great conflicts.” According to him, on the eve of the entry of the USA into the Second World War, as the “controversial relationship” between the two countries became tense, the USA imposed sanctions against Japan.

“In the world today, one can imagine a similar situation between China and the United States, or even predicted and talked about by the leaders of various countries about the dependence on the United States and Europe – because the opposite of the trade deficit … there is capital, capital imbalance, and capital can be used as war.”

Gold remains the top hedge

Amid these tensions, gold still the best place to keep money, Dalio said historical sales these precious metals were dragged down overboard. The author Tuesdaytentative signs of recovery of gold and silver have been observed.

“That’s not going to change day by day,” he said, when asked whether the latest price action should raise questions about whether gold is the safest place to put capital.

“Gold is up about 65% from a year ago and about 16% off its highs, and I think people get it wrong, is it going to go up and down, should I buy it?” Dalio said.

“Instead, … maybe central banks or governments or sovereign wealth funds should say what percentage of my portfolio should be in gold (and) keep a certain percentage because it’s a very effective diversifier to other poorer parts of the portfolio.”

“Since gold is a diversifier, when times are bad, it does exceptionally well, and when times are booming, less so, (but) it’s an effective diversifier,” Dalio added. “I would say the most important thing is to have a diversified portfolio.”