Ray Dalio Warns Fed Bubble Could Send Gold, Bitcoin Soaring — Then Implode
Ray Dalio has issued a stark warning that the Federal Reserve’s resolution to halt quantitative tightening marks the start of a harmful cycle of “stimulating right into a bubble” quite than responding to financial weak spot.
The billionaire investor and Bridgewater Associates founder argues that the Fed’s shift from steadiness sheet discount to growth represents a basic late-stage debt cycle dynamic that might drive gold and Bitcoin dramatically larger earlier than an inevitable collapse.
The Fed announced that it will finish quantitative tightening, efficient December 1, 2025, transitioning to steadiness sheet upkeep at $6.5 trillion, whereas redirecting company safety revenue into Treasury payments quite than mortgage-backed securities.
Dalio views this as greater than a “technical maneuver,” as officers describe it, significantly because the shift happens alongside giant fiscal deficits and robust non-public credit score creation.
Meanwhile, the S&P 500 earnings yield of 4.4% barely exceeds the 10-year Treasury yield of 4%, leaving fairness threat premiums at a razor-thin 0.4%.
Historic Reversal: From Depression Stimulus to Bubble Fuel
Dalio emphasizes that earlier quantitative easing deployments occurred underneath basically completely different circumstances, characterised by financial contractions, falling asset valuations, low inflation, and vast credit score spreads.
Meanwhile, the present atmosphere options the other. Stocks are hitting new highs, the financial system is rising at a charge of two% yearly, unemployment is at simply 4.3%, and inflation is working above the Fed’s 2% goal, at over 3%.
“This time the easing might be right into a bubble quite than right into a bust,” Dalio warned, noting that AI shares already register as bubble territory in accordance with his proprietary indicators.
The mixture of large fiscal deficits, shortened Treasury maturities to compensate for weak long-term bond demand, and central financial institution steadiness sheet growth represents what he describes as “basic Big Debt Cycle late cycle dynamics.“
Market analysts have shared these considerations.
Cristian Chifoi noted that whereas narratives surrounding QE and QT dominate discussions, precise liquidity started flooding markets between October and December 2022, when the tightening successfully ended, with the Reverse Repo Program serving because the gateway.
The FED will finish QT in December
So everybody ready for the REAL liquidity injections to begin in December proper?
While we’re late within the cycle and everybody thinks the 4y cycle is over
But QE or QT have been all the time narratives, liquidity was beginning to flood markets since… https://t.co/TQmID4D3vu pic.twitter.com/odHw9vnZ0b
— Cristian Chifoi (@ChifoiCristian) October 29, 2025
Ted Pillows additionally warned that crypto markets, traditionally delicate to liquidity circumstances, might not backside till precise quantitative easing begins quite than merely stopping tightening.
He cited the 40% decline in altcoins that adopted the Fed’s 2019 QT pause earlier than recent stimulus arrived.
Gold Surges as Liquidity Mechanics Shift
Gold has responded dramatically to the coverage shift, recovering above $4,000 per ounce after preliminary volatility following the Fed announcement.
The World Gold Council reported that world demand in Q3 2025 elevated 3% year-over-year to 1,313 tons, with funding demand reaching the best quarterly whole on document as costs achieved 13 new all-time highs in the course of the quarter.
Dalio defined the mechanics driving gold’s enchantment: with zero yield and gold buying and selling at roughly $4,025 whereas 10-year Treasuries provide 4%, buyers should anticipate gold value appreciation exceeding 4% yearly to favor the steel over bonds.
“The larger the inflation charge, the extra gold will go up as a result of most of inflation is as a result of worth and shopping for energy of different currencies happening on account of their elevated provide, whereas there isn’t a lot elevated provide of gold,” he wrote.
Central financial institution buying has accelerated 10% year-over-year, with Poland asserting expanded programs and Brazil resuming purchases for the primary time since July 2021.
However, in occasions of economic uncertainty and disaster, Bitcoin has outperformed Gold and all different threat belongings.
The Melt-Up Before the Crash
Dalio’s most ominous warning facilities on predicting that elevated Fed steadiness sheet growth, mixed with rate of interest cuts amid giant fiscal deficits, would represent “basic financial and financial interplay of the Fed and the Treasury to monetize authorities debt.“
This dynamic ought to push actual rates of interest down, compress threat premiums, develop price-to-earnings multiples, and particularly enhance long-duration belongings, equivalent to know-how and AI shares, alongside inflation hedges, together with gold and inflation-indexed bonds.
“It could be affordable to anticipate that, much like late 1999 or 2010-2011, there could be a robust liquidity melt-up that may finally change into too dangerous and must be restrained,” Dalio wrote.
“During that melt-up and simply earlier than the tightening that is sufficient to rein in inflation that may pop the bubble is classically the perfect time to promote,” he concluded.
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