Someone recently asked me, after the past half-century of such fierce gold price increases, will it continue for the next 50 years? Honestly, that’s a good question because the answer is much more complicated than you think.

Let me start with a fact to give you a sense. Since the day in 1971 when Nixon ended the gold standard, the gold price has gone from $35 per ounce to be freely market-priced, to now over 145 times higher. Especially in the past two years, from just over $2,000 at the beginning of 2024 to over $5,000 in mid-year, the cumulative increase has exceeded 150%. This rally is indeed very fierce.

But behind this rally, there is a pattern I’ve observed: every major surge in gold isn’t smooth. Looking back over the past 55 years, there have been roughly three distinct bull market periods. The first was from 1971 to 1980, from $35 to $850, a 24-fold increase. At that time, the gold standard was just abandoned, trust in the dollar was shaky, coupled with oil crises and geopolitical turmoil, everyone was rushing to buy gold. But in 1980, after the Fed aggressively raised interest rates over 20%, gold collapsed by 80%. Then, for the next 20 years, it traded sideways between $200 and $300, with almost no gains.

The second bull market was from 2001 to 2011, rising 7.6 times. Starting from the low of $250 after the dot-com bubble burst, it peaked at $1,921. This rally was driven by the global anti-terrorism wars triggered by 9/11, with the U.S. lowering interest rates and issuing debt to fund huge military expenses, which pushed up housing prices and eventually triggered the 2008 financial crisis. The U.S. then resorted to QE to rescue the economy. Under this loose monetary environment, gold rose for 10 years straight. However, after the European debt crisis in 2011, the Fed ended QE, and gold entered an 8-year bear market, dropping over 45%.

The current third bull market started in 2019, from a low of $1,200, and has already exceeded $5,000 by mid-year. Many factors are driving this: de-dollarization worldwide, the U.S. crazy QE in 2020, the Russia-Ukraine war, the Israel-Palestine conflict, the Red Sea crisis, plus the escalation of Middle East tensions, trade worries sparked by U.S. tariffs, stock market volatility globally, and a weakening dollar—all fueling the rally.

I’ve noticed an interesting pattern: each bull market starts with a credit crisis combined with loose monetary policy. The early stage is slow and steady, the middle accelerates with crisis catalysis, and the late stage is overheated speculation. On average, each bull lasts 8 to 10 years, with gains ranging from 7 to 24 times. The signals for ending a bull are usually when tightening begins along with inflation control—like the rate hikes in 1980 or the end of QE in 2011.

But this time is a bit different. The debt levels of major economies worldwide are already sky-high, and central banks can’t raise interest rates sharply like before. So, the traditional clean tightening cycle may be hard to materialize. What’s more likely is that gold prices will fluctuate wildly within a high range for several years—what we call a high-level consolidation phase. The true end signal might require waiting for a new, more credible global monetary and credit system to emerge.

Regarding investing in gold itself, I think it depends on what you compare it to. Looking back from 1971 to now, gold has increased 120 times, while the Dow Jones Industrial Average has risen from about 900 points to around 46,000 points, a roughly 51-fold increase. So, over a 50-year span, the returns from gold investment aren’t necessarily worse than stocks. But here’s the key issue: gold prices are not smooth. After the 1980s, from 1980 to 2000, gold mostly hovered between $200 and $300, trading sideways for nearly 20 years. If you invested in gold during that period, you’d have almost no gains and would have to bear opportunity costs. How many 20-year periods do we have in life?

So, my view is that gold is a good investment tool, but it’s more suitable for trading in waves when the market is trending, rather than for purely long-term holding. Bull markets in gold are often accompanied by macro crises, while bear markets tend to be long and sluggish. Catching the right cycle can lead to big gains, but missing it might mean lying flat for many years. Also, since gold is a natural resource, its extraction costs increase over time, so even after a bull run ends, prices tend to retrace but at higher lows—an important regularity.

There are many ways to invest in gold, from physical gold, gold savings accounts, ETFs, to futures and CFDs. For short-term trading, futures or CFDs are more flexible and cheaper in transaction costs. But regardless of the tool, the core is to grasp the trend.

Compared to stocks and bonds, gold’s return methods differ. Gold mainly relies on price differences; it doesn’t generate interest, so timing of entry and exit is crucial. Bonds mainly rely on coupon payments, stocks on corporate growth. In terms of investment difficulty, bonds are the simplest, gold is next, and stocks are the hardest. But over the past 30 years, stock returns have been the best, followed by gold, then bonds.

My advice is to buy stocks during economic growth periods and allocate gold during recessions. A more stable approach is to set asset ratios based on personal risk appetite and investment goals, including stocks, bonds, and gold. Markets are unpredictable, and major political and economic events can happen at any time. Holding a balanced mix of stocks, bonds, and gold can offset some volatility risks and make your investment more stable.