I have been analyzing the long-term gold price charts recently and discovered a very interesting phenomenon. Over the past 55 years, gold has risen from $35 to over $5,000, a gain of more than 145 times, but if you look closely at the 10-year trend chart, you'll find that this increase is not smooth at all—some years it stagnates for 20 years, while in other periods it doubles within just a few years.

Speaking of which, the true beginning of the modern gold market was in 1971 when Nixon ended the gold standard. Before that, gold prices were fixed at $35, and there was no trading mechanism. After the decoupling, the first ten years (1971-1980), gold rose from $35 to $850, a 24-fold increase. At that time, trust in the dollar was collapsing, there was an oil crisis, the Iranian Revolution—global chaos ensued, and gold became the ultimate safe haven. But in 1980, the Federal Reserve aggressively raised interest rates by over 20%, causing gold prices to crash by 80% instantly, and for the next 20 years, it hovered listlessly between $200 and $300.

The second bull market started after the dot-com bubble burst in 2001. The 9/11 attacks triggered a global war on terror, and the US began cutting interest rates and issuing debt to support military spending, which pushed up housing prices and eventually triggered the 2008 financial crisis. The Fed printed money wildly to rescue the economy, and over these 10 years, gold surged from $250 to $1,921, an increase of over 700%. But after the European debt crisis in 2011, the Fed ended quantitative easing, and gold entered an 8-year bear market, falling more than 45%.

We are now in the third bull market (2019 to present). Gold has risen from a low of $1,200 to over $5,000, an increase of more than 300%. The driving forces behind this rally are clear: global de-dollarization, US疯狂QE, the Russia-Ukraine war, Middle Eastern geopolitical risks, and central banks worldwide continuing to increase gold reserves in 2024-2025. Just looking at the past two years, from over $2,000 to over $5,000, the increase exceeds 150%, far surpassing stocks, bonds, and other assets.

But here’s a question worth pondering. What is the common pattern in the three previous bull markets? They all started with a credit crisis and loose monetary policy. Each bull market also ended with aggressive tightening to control inflation—1980 rate hikes, 2011 QE ending—causing gold prices to fall sharply.

The problem is, now global government debt has reached terrifying levels, and central banks can no longer raise interest rates significantly as they did in the past. This means the traditional tightening cycle may not occur. A more likely scenario is that gold prices will fluctuate wildly within a high range for several years—what I call a “high-level consolidation period.” The real signal of an end might only come when a new, more credible global monetary system emerges.

Regarding investing in gold, my view is straightforward. Over the past 50 years, gold has increased 120 times, while the Dow Jones has risen 51 times. From a long-term return perspective, gold is not inferior to stocks. But the problem is, during 1980-2000, gold barely moved, stagnating between $200 and $300. How many 20-year periods in life can you wait?

So, gold is a very good investment tool, but it’s more suitable for swing trading rather than pure long-term holding. Bull markets in gold are often accompanied by macro crises (inflation, geopolitical tensions, 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.

Additionally, since gold is a natural resource, its extraction costs increase over time, so even after a bull run ends, the low points tend to gradually rise. Looking at the 10-year data of gold’s trend chart, each retracement low is higher than the previous one. This indicates that, in the long run, gold still has support, and there’s no need to worry about it becoming worthless.

In terms of investment difficulty, bonds are the simplest (just collect interest), gold is next (profit from price differences), and stocks are the hardest (need to pick the right companies). But over the recent 30 years, stock returns have actually been better, followed by gold, and then bonds.

My advice is to allocate according to economic cycles: choose stocks during growth periods, and gold during recessions. The most prudent approach is to find a balanced allocation ratio based on your risk tolerance among stocks, bonds, and gold. When the economy is strong, corporate profits are good, stocks tend to rise, and gold is less popular; during economic downturns, gold’s value-preserving feature becomes prominent and tends to be more sought after.

In facing the ever-changing markets and unpredictable emergencies (like the Russia-Ukraine war, inflation crises), holding a certain proportion of stocks, bonds, and gold can offset some volatility risks and make your investments more stable. This is the most honest conclusion I’ve come to after many years of observing the markets.