Recently, someone asked me whether gold is truly worth investing in, and it reminded me of an interesting data point—over the past 55 years, gold has risen from $35 per ounce to more than $5,000 today, an increase of over 145 times. But the story behind it is far more complex than the numbers alone.

The truth is, the moment in 1971 when Nixon announced the dollar’s move away from the gold standard is where the modern gold market really began. Before that, gold prices were pinned down at $35 and couldn’t move at all. Once it was freed, the market reacted immediately—people lost confidence in the dollar and preferred holding gold rather than paper currency. This run-up from $35 to $850 was the first bull market (1971–1980), rising 24 times.

Later, there were two more major runs. After the dot-com bubble in 2001, gold climbed from a low of $250 all the way to $1,921 in 2011—more than a 7-fold increase over 10 years. And in this latest cycle, starting from $1,200 in 2019, it has already broken through $5,000 this year, up more than 300%.

I studied the historical gold price chart carefully and found a pattern: every bull market is triggered by the same thing—credit crises combined with loose monetary policy. The end of the gold standard in 1971, the low-interest-rate rescue in 2001, and the QE during the 2020 pandemic all fit this logic. And each time, it goes through three stages: first, slow grinding accumulation; then, the crisis acts as a catalyst and accelerates the rally; and finally, speculative capital pours in and becomes overheated. On average, the three bull markets lasted 8 to 10 years, with gains ranging from 7 times to 24 times.

But this time is different. In previous bull markets, they ended because central banks aggressively raised interest rates. In 1980, the U.S. Federal Reserve pushed rates above 20%, causing the price of gold to crash by 80%. Now what? Global government debt has piled up to the sky, so central banks simply can’t raise rates as sharply as they did in the past. So I think the real “end signal” may never arrive. A more likely scenario is that gold prices will experience violent swings around a very high level for several years, forming a “high-level consolidation.”

So, is gold suitable for investment? It depends on the time horizon. Over a 50-year span, gold’s gains do not fall short of stocks. The Dow Jones Index rose 51 times in the same period, while gold rose 120 times. But the problem is that during the 20 years from 1980 to 2000, gold mostly traded sideways between $200 and $300, with almost no returns. How many 20-year periods can people afford to wait for? That’s why I believe gold is indeed a good tool, but it’s better suited for swing trading rather than simply holding long term.

Gold’s returns come entirely from price spreads; it doesn’t pay interest. You have to catch those major bullish phases to make money—there’s a long stretch of rising, then a sharp selloff, followed by stabilization, and then the next leg up. Get the timing right and you can make a lot; get it wrong and you could end up staying flat for years. Also, because gold is a natural resource, mining costs increase year by year. So even after the bullish phase ends and prices decline, the lows tend to gradually rise—this is worth paying attention to.

There are several ways to invest in gold. Physical gold is convenient for concealing assets but is troublesome to trade; gold savings passbooks have poor liquidity; gold ETFs are more convenient but require paying management fees. If you want to do short-term swing trading, gold futures or contracts for difference (CFDs) are more flexible—you can go long or short, and even with a small amount of capital you can participate. Personally, I’m more inclined toward CFDs because trading hours are flexible, capital efficiency is high, and they’re especially suitable for retail investors.

Finally, let me share my view on the entire investment approach. Gold, stocks, and bonds earn returns in completely different ways—gold relies on price differences, bonds rely on coupon/interest payments, and stocks rely on corporate growth. In terms of difficulty, bonds are the simplest, gold is next, and stocks are the hardest. But in terms of returns over the past 30 years, stocks have actually done better. My suggestion is: during periods of economic growth, choose stocks; during economic downturns, allocate to gold. A more steady approach is to hold a certain proportion of stocks, bonds, and gold according to your own risk tolerance, so that you can offset some volatility risk. After all, markets change rapidly—unexpected events like the Russia-Ukraine war and inflation-driven rate hikes can happen at any time. Diversification is the key to surviving long term.