Gold is outperforming the S&P 500 stock market index this year, a significant deviation from past trends. In 2025, gold prices have surged by 48%, while the S&P 500 has only risen 17%. This stark contrast highlights differing philosophies from two of the most prominent figures in finance: Warren Buffett and Ray Dalio.
Warren Buffett, known for his leadership of Berkshire Hathaway, has amassed a net worth of approximately $145 billion. He generally avoids gold, labeling it as an “unproductive” asset. Buffett’s investment strategy typically focuses on companies with consistent growth, dividends, and management expertise. In a 2011 letter to shareholders, he explained his aversion to gold, emphasizing that, unlike productive companies, gold does not generate earnings or cash flow. He argued that an ounce of gold purchased today will remain an ounce in a century, yielding no additional value over time. Buffett further illustrated his point by noting the total value of above-ground gold, currently around $28 trillion, could instead buy leading companies such as Nvidia, Microsoft, and Apple multiple times—companies that contribute real value to the economy.
Conversely, Ray Dalio, founder of the hedge fund Bridgewater Associates and who retired in 2022 with a net worth exceeding $15 billion, takes a more favorable view of gold. A historical perspective influences his thinking, particularly regarding U.S. fiscal policies. With the U.S. national debt surpassing $38 trillion and alarming budget deficits, Dalio is concerned about the implications of such spending. He highlights a parallel to the 1970s when inflation and debt undermined confidence in paper currencies. For Dalio, gold represents a historical form of money and a hedge against potential currency devaluation due to increased money supply.
In recent statements, Dalio recommended that investors consider allocating up to 15% of their portfolios to gold. While recognizing that physical gold isn’t practical for everyone, he pointed out that exchange-traded funds (ETFs) like the iShares Gold Trust offer a viable alternative. These investments allow individuals to benefit from gold’s potential resilience in times of economic uncertainty.
The ongoing discussion raises important questions for investors: Should they lean more toward Buffett’s traditional wisdom, which emphasizes equities’ long-term returns? Or should they heed Dalio’s warnings and embrace gold given the current economic climate?
Market performance data supports both perspectives. Historically, gold has provided a compound annual return of 7.96% over the last 30 years, notably less than the S&P 500’s 10.6% return during the same period. However, in light of potential fiscal crises, gold may offer a necessary safeguard, acting as an insurance policy for portfolios.
Ultimately, a balanced approach might emerge as the most prudent strategy. While the 15% allocation Dalio suggests might be excessive for some, a smaller allocation between 5% and 10% could hedge against economic volatility while still allowing for the greater long-term growth typically associated with equities. Investors must weigh these contrasting viewpoints and determine the right blend for their financial situation, particularly as they navigate an unpredictable economic landscape.
