Is "currency depreciation" trading merely driven by sentiment? Former Bridgewater executive suggests holding both USD and gold!

The US dollar had a dismal start to 2026, plunging again on Tuesday to a near four-year low. The market attributed this performance to President Trump’s apparent laissez-faire attitude toward a weakening dollar. However, Alexander Campbell, former head of commodities at hedge fund giant Bridgewater, spoke up for the dollar on Wednesday, stating that current market panic over the dollar is overly exaggerated, and investors should hold both the dollar and gold.

In his newly published Substack column, Campbell pointed out that simultaneously allocating both the dollar and gold is one of the best strategies for portfolio diversification, as holding a long position in gold is essentially the same as holding a short position in the dollar. The founder and CEO of BlackSnowCapital explained that this relationship is not just because gold is denominated in dollars, but also because speculative capital often floods into the gold market when the dollar weakens.

“Therefore, I hedge. Holding dollars is not a bet that the dollar will appreciate significantly, but an acknowledgment that my precious metals positions already constitute a bet that the dollar will not strengthen,” Campbell said.

“My holdings in gold and silver are essentially dollar shorts. Every ounce of precious metal I buy is achieved by selling dollars. If I don’t hedge some of these risks, then in addition to the price volatility of the precious metals themselves, I will also face a huge exposure to a weakening dollar,” he added.

Campbell also stated that the much-discussed “currency devaluation” trade—where investors convert dollars and other fiat currencies into assets like gold—is in fact “driven more by market sentiment than by actual trading activity.”

“The reality is not that investors are collectively fleeing the dollar and pouring into precious metals, but rather that the long-running bull market and low-inflation environment (once again driven by globalization) have caused investors to be severely underweight in gold and silver, and this cognitive bias has been amplified by market sentiment,” Campbell said.

He pointed out that investors who only hold precious metals without any other allocation need to recognize that they are essentially shorting the dollar. “If you are truly bearish on the US, your trading target should not be US Dollar Index futures, but rather selling US assets actually held by overseas investors,” he said, listing assets such as S&P 500 index ETFs, long-term US Treasury ETFs, and large-cap tech stock ETFs.

Campbell stated that overseas investors have not yet liquidated their holdings of trillions of dollars worth of US stocks and bonds on a large scale.

“If you want to judge whether the dollar is truly facing its doomsday, just watch capital flows: Are European investors really selling off S&P 500 constituent stocks? Are Japanese pension funds dumping US Treasuries? The answer is no,” he said.

Campbell outlined a series of scenarios that could cause him to worry about the dollar’s outlook, but so far, none of these have materialized. These include: Japanese life insurers massively liquidating US Treasuries, the dollar’s share in international payments falling from the current 50% to below 40%, investors fleeing from USDT en masse, and the emergence of a credible alternative payment system capable of actually settling trade.

For investors who still believe in the “dollar doomsday theory”, he suggests shorting US stocks and bonds. “Because if overseas investors truly have had enough of Trump’s policies, these assets would be the ones actually dumped, and the trading volume and impact of US Dollar Index futures are far from sufficient to reflect real bearish sentiment.”

Meanwhile, for those who believe the dollar will enter a controlled decline, Campbell recommends holding precious metals, dollars, and short-term assets simultaneously. He said this strategy draws on market operations from 2000 to 2010, when the dollar also experienced a downward cycle.