Dalio Warns: World Teetering on Edge of “Capital War”

On Tuesday local time (February 3), legendary investor and Bridgewater founder Ray Dalio warned that amid escalating geopolitical tensions and highly volatile capital markets, the world is on the brink of a “capital war.”

 

Speaking at the World Governments Summit in Dubai, Dalio said the current situation is approaching a critical tipping point for capital war.

 

Capital war refers to the weaponization of money through trade embargoes, cutting off capital market access, or using debt ownership as leverage.

 

“We are standing on the edge,” Dalio said. “It means we haven’t truly entered capital war yet, but we are very close — and crossing that line would be very easy because there is mutual fear on all sides.”

 

Dalio cited the Trump administration’s recent threats over Greenland, noting that European investors holding large amounts of dollar-denominated assets fear potential sanctions; meanwhile, the U.S. side could develop reciprocal concerns about losing access to needed capital or support from Europe.

 

According to Citigroup research, from April to November last year, European investors accounted for up to 80% of foreign purchases of U.S. Treasuries.

 

“Capital, funding — it’s critical,” Dalio said. “We are seeing capital controls emerge in various parts of the world today, and there is uncertainty about who will ultimately bear the brunt. So we are on the edge — not in capital war yet, but it’s a logical worry.”

 

Since returning to the White House last year, President Trump has imposed a series of punitive tariffs on trading partners, only to repeatedly adjust or withdraw them — causing sharp financial market volatility.

 

Dalio added that historically, capital wars often involve foreign exchange and capital controls. Sovereign wealth funds and central banks are already preparing for such measures.

 

He further noted that capital wars in history typically revolve around “major conflicts.” He cited the U.S. sanctions on Japan before formally entering World War II, which escalated the confrontational relationship between the two countries.

 

Gold Remains a Key Safe-Haven Asset

 

In this tense environment, Dalio said that despite the historic selloff and price plunge in precious metals last week and earlier this week, gold remains the best place to park money.

 

Gold and silver suffered rare violent drops on Friday and Monday, but showed initial signs of stabilization on Tuesday.

 

When asked if the recent extreme swings would undermine gold’s status as the safest asset, Dalio replied: “That doesn’t change over time.”

 

“Gold is up about 65% from a year ago, but down roughly 16% from its peak. I think people often make the mistake of obsessing over whether gold will rise or fall in the short term, or whether now is the time to buy,” he said.

 

Dalio added: “Instead, perhaps central banks, governments, or sovereign wealth funds should ask: What percentage of my portfolio should be in gold, and maintain that allocation long-term? Because it provides very effective diversification for the weaker parts of a portfolio.”

 

He concluded: “Precisely because gold is a diversifier, it tends to perform exceptionally well in difficult times and relatively poorly in boom times — but it remains a very effective diversification tool. The most important thing is to have a highly diversified portfolio.”