Gold is about to explode? Ray Dalio warns that Russian sanctions could destroy the US dollar

Billionaire investor Ray Dalio warned on microblogging site “History and logic have made it clear that sanctions reduce demand for fiat currencies and the debt denominated in them and support gold,” Dalio said, pointing to previous episodes in which economic warfare reshaped global monetary dynamics.

Dalio’s comments follow Washington imposing new sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, over the ongoing war in Ukraine. The move has fueled supply concerns, pushing oil prices higher earlier this week, although Brent crude fell 36 cents to $65.63 a barrel on Friday morning and U.S. West Texas Intermediate fell 33 cents to $61.43.

“Throughout history, before and during shooting wars, there have been financial and economic wars that we now call sanctions,” Dalio noted, adding that when a debtor refuses to pay his obligations, he can harm the creditor financially, but also weaken his own currency and debt, an effect that is even greater when it concerns the reserve currency of the leading world power.

The gold price has been volatile in response to these developments. Spot gold fell 0.2% to $4,118.68 an ounce early Friday, on track for its first weekly decline in 10 weeks, pressured by a stronger dollar and pre-US inflation positioning. December US gold futures fell 0.3% to $4,133.40 an ounce.

Dalio emphasized gold’s continued role as a non-fiat currency, stating that it “remains securely held and universally accepted” and historically appreciates during periods of currency stress and low interest rates. Investors are keeping a close eye on gold as a hedge, especially with expectations of interest rate cuts from the US Federal Reserve later this month.

Strength of the dollar and broader context

The dollar index, which tracks the greenback against a basket of currencies, rose for the third straight time to 99 on Friday, making bullion more expensive for holders of other currencies. Trade tensions between Washington and Beijing have also increased, making global markets even more uncertain. Dalio’s warning reinforces the growing narrative that geopolitical and economic shocks such as sanctions on Russia could ripple far beyond the target country, impacting reserve currencies, debt markets and safe havens like gold. “The ownership and price of gold is rising,” he wrote, “because it is a non-fiat currency that is securely held and universally accepted.”

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