Gold and Bitcoin rise together: Is Ray Dalio’s scenario unfolding?

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Gold and Bitcoin rise together

Two August leaders

Bitcoin unexpectedly climbed above $80,000. Just a week ago, it was trading around $64,000, but the world’s largest cryptocurrency has gained about 25% over seven days. The sharpest move came last week, when Bitcoin surged more than 20% in three days, marking its strongest three-day gain since 2023.

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Gold accelerated at the same time. On Tuesday, the spot price rose to $4,677 per ounce, its highest level in more than three months. The metal has gained more than 15% since the start of August and is on track for its strongest monthly increase since September 1999. Gold futures also climbed above $4,720 per ounce.

The rally has spread to other assets as well. Ethereum has gained more than 30% over the past week, while XRP is up around 50%. Silver followed gold higher, rising above $69 per ounce. Still, the simultaneous rally in Bitcoin and gold has been one of the most notable market moves in recent days.

It all started with U.S. bonds

The main trigger was the U.S. Treasury’s decision to increase buybacks of longer-dated government bonds. The department said the size of such operations would be doubled, while Treasury Secretary Scott Bessent suggested purchases could exceed $4 billion. Following the announcement, long-term yields fell and the dollar came under pressure.

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For gold, this created several favorable conditions at once. A weaker dollar makes the metal cheaper for buyers outside the U.S., while lower yields reduce the appeal of bonds compared with an asset that does not generate interest income. The dollar index has lost about 0.8% since the start of August, while Treasury yields have fallen by roughly 3 basis points this month.

Bitcoin received support from a different direction. U.S. spot Bitcoin ETFs attracted $1.92 billion in net inflows last week, the highest weekly total since October. At the same time, the price increase triggered a short squeeze, with more than $4 billion in bearish positions liquidated, further accelerating the rally.

Large bets on further gains have also appeared in the derivatives market. On Monday, traders spent $2.9 million on options that will profit if Bitcoin rises above $82,000 by September 4. At the same time, market participants are still actively hedging against a possible price decline.

What Ray Dalio saw

Just days before the latest rally in gold and Bitcoin, legendary investor and Bridgewater Associates founder Ray Dalio warned that the U.S. financial position was approaching an inflection point. According to his estimates, the government is currently spending about 40% more than it collects. In July alone, the federal budget deficit reached $432 billion, while servicing the enormous national debt is becoming increasingly expensive.

Dalio believes investors should reduce their exposure to debt assets, including bonds. As protection, he suggested allocating 10%–15% of a portfolio to gold and adding a small amount of Bitcoin. In his view, if the U.S. does not change course, a debt crisis could emerge within one to five years. Dalio sees roughly three years as the most likely timeframe.

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Against this backdrop, analysts see room for further gains in gold. IG analyst Tony Sycamore believes buyers could return on dips and push the price toward $4,900–$5,000 per ounce. TD Securities maintains a higher target of $5,350, although it warns that rising interest rates could temporarily halt the rally.

Bitcoin’s potential will largely depend on whether demand from large investors remains strong. Another factor could be Strategy returning to the market: the world’s largest corporate holder of Bitcoin has not purchased the cryptocurrency for two weeks. If institutional demand remains strong and Strategy starts buying again, Bitcoin could gain another source of demand.

For now, the moves in gold and Bitcoin are playing out much like the scenario Dalio described: investors are increasingly looking for alternatives to the dollar and government debt.

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