Recently, I’ve been pondering a question: why has gold been on such a strong upward trend over the past 50 years? From $35 an ounce in 1971 to over $5,000 this May, this historic high in gold prices actually reflects changes in the entire global financial system.

Speaking of which, gold truly began to be freely priced starting in 1971. That year, Nixon announced the detachment of the dollar from gold, and the Bretton Woods system officially collapsed. Suddenly, gold was liberated from the fixed price of $35, giving the market the right to set its value. Over the next 55 years, gold prices rose from $35 to over $5,100, a cumulative increase of more than 145 times, which is truly astonishing.

I took a close look at the historical trend, and gold’s rises and falls actually follow clear patterns. Over the past half-century, there have been roughly three major bull markets. The first was from 1971 to 1980, from the dollar trust crisis to the oil crisis, with gold rising 24 times. At that time, everyone feared the dollar would become worthless paper, preferring to hold gold rather than dollars, which drove the first wave of price increases.

The second bull market was from 2001 to 2011, starting after the dot-com bubble burst, with gold rising from $250 to $1,921, an increase of over 700%. This cycle was mainly driven by the 9/11 attacks and the subsequent financial crisis, with the U.S. aggressively cutting interest rates and implementing QE, indirectly boosting gold prices.

The most interesting is the third wave, from 2019 to now, with gold rising from $1,200 to over $5,000, an increase of more than 300%. The driving forces behind this rally are very strong—global central banks疯狂 buying gold, geopolitical turmoil, and the dollar’s continuous weakening. These factors stacking together have kept rewriting gold’s all-time highs. Especially in the past two years, from early 2024’s $2,000+ to now, the cumulative increase exceeds 150%, far surpassing stocks and other assets.

But here’s a key observation—each bull market’s trigger is the same: a credit crisis combined with loose monetary policy. And each bull market’s end is also predictable, usually when central banks start aggressively raising interest rates to control inflation. In 1980, the Fed raised rates by over 20%, causing gold to crash by 80%. In 2011, when the Fed ended QE, gold entered an 8-year bear market, falling over 45%.

The current question is, how long can this historic high in gold prices last? My judgment is that the traditional tightening cycle may not recur. Why? Because global government debt has become astronomical, and central banks simply cannot raise interest rates significantly like before, or debt would explode. So, it’s more likely that gold will fluctuate within a high price range for several years—that is, a “high-level consolidation period.”

So, is gold suitable for investment? Honestly, it depends on how you play it. If you compare gold to stocks, over the past 50 years, gold has risen 145 times, while the Dow Jones has increased 51 times, making gold seem stronger. But the problem is, gold’s gains are not smooth; from 1980 to 2000, it was stagnant for 20 years, hovering between $200 and $300, with no returns. How many people have 20 years to wait?

Therefore, my conclusion is that gold is a very good investment tool, but it’s better suited for swing trading rather than long-term holding. Gold bull markets are usually accompanied by macro crises—inflation, geopolitical risks, monetary easing—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.

Another detail worth noting is that gold is a natural resource; its mining costs increase over time. So, even after a bull run ends and prices pull back, the lows will gradually rise. This means gold won’t fall to zero; as long as you understand this pattern, you won’t be wasting effort in vain.

There are many ways to invest in gold, from physical gold, gold savings accounts, ETFs, to futures and CFDs, each with pros and cons. If you want to do short-term swing trading, futures or CFDs are more flexible and offer higher capital efficiency. Small investors can choose CFDs because of high leverage and low entry barriers, allowing small amounts of capital to start.

Finally, I want to say that the return logic of gold, stocks, and bonds is completely different. Gold relies on price differences, bonds on interest income, and stocks on corporate growth. The difficulty ranking for investing is: bonds easiest, gold next, stocks hardest. But in terms of returns over the past 30 years, stocks have actually performed better than gold.

So, a smarter approach is to allocate based on the economic environment. During periods of economic growth, choose stocks; during recessions, allocate to gold. The most stable strategy is to hold a proportion of stocks, bonds, and gold according to your risk profile, which can offset some volatility. The Russia-Ukraine war and rising inflation and interest rates are perfect examples—diversified assets can make your investments more resilient in face of unpredictable shocks.