Recently, I’ve seen many people discussing gold, and I realized that many investors don’t have a deep enough understanding of gold’s historical trends. Instead of blindly following the trend, it’s better to first understand what the gold price has actually experienced over the past 50 years.

Since 1971, when gold left the gold standard system, the 55-year increase has been truly beyond imagination. From $35 per ounce to over $5,000 now, it has risen more than 145 times. Especially in the past two years, from just over $2,000 at the beginning of 2024, it surged past $5,100, with a total increase of over 150%, outperforming stocks and bonds by a wide margin.

But this upward trend has definitely not been smooth sailing. I carefully examined 20 years of historical gold price charts and found that gold actually went through three distinct bull market cycles. The first was from 1971 to 1980, with gold prices rising 24 times, but then the next 20 years saw prices hovering between $200 and $300, with almost no gains. The second bull market was from 2001 to 2011, with an increase of over 700%, lasting a full 10 years. The third started in 2019 and continues to this day, with gains exceeding 300%, driven by multiple factors such as global de-dollarization, central bank gold buying, and geopolitical risks.

By understanding the patterns of these three bull markets, I’ve noticed an interesting phenomenon: each time gold prices rise, the starting point is always a credit crisis combined with loose monetary policy. In 1971, it was the collapse of trust in the dollar; in 2001, it was the low interest rates following 9/11 to rescue the economy; and the current cycle starting in 2018 was driven by frantic QE by central banks and geopolitical turmoil. Each bull market ends with aggressive tightening and inflation control, such as the ultra-high interest rates in 1980 and the end of QE in 2011.

Here’s a key question: will there be a next 50-year gold bull run? My view is that a traditional, clean tightening cycle may be very difficult to occur again. Because government debt levels in major economies worldwide are already astronomical, central banks can’t raise interest rates significantly like in the past. The more likely scenario is that gold prices will fluctuate wildly within a high price range for several years, which is what we call a “high-level consolidation phase.” The true signal of an end will only come when a completely new, more credible global monetary and credit system emerges.

So, is gold suitable for investment? I think it depends on the situation. Looking from 1971 to now, gold has increased 120 times, while the Dow Jones Index has risen 51 times, so the long-term return isn’t bad. But the problem is that gold prices don’t rise steadily; the 20 years from 1980 to 2000 were basically sideways, and if you invested in gold during that period, you wasted 20 years and opportunity costs. How many 20-year periods does one have in life?

Therefore, my conclusion is that gold is a very good investment tool, but it’s more suitable for trading in waves when there’s a trend, 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. Since gold is a natural resource, and extraction costs tend to increase over time, even if the bull market ends and prices pull back, the lows will gradually rise, so there’s no need to worry about it falling to worthless levels.

There are many ways to invest in gold: physical gold, gold savings accounts, gold ETFs—all are options. But if you want to do short-term trading, futures or Contracts for Difference (CFDs) are more flexible because they offer leverage to amplify gains, and you can go long or short. These tools have the advantage of low transaction costs, and small amounts of capital can open accounts, making them more accessible for retail investors.

Finally, I want to say that the sources of returns for gold, stocks, and bonds are completely different. Gold relies on price differences, bonds on interest income, and stocks on corporate growth. In terms of investment difficulty, bonds are the simplest, gold is next, and stocks are the most challenging. But looking at recent 30-year performance, stocks have actually performed better, followed by gold, with bonds performing the worst.

A better investment strategy is “buy stocks during economic growth periods and allocate gold during recessions.” A more prudent approach is to hold a diversified portfolio based on individual risk tolerance, including a certain proportion of stocks, bonds, and gold, to offset some of the volatility risks. The market changes rapidly—events like the Russia-Ukraine war and rising inflation and interest rates prove this. Facing unpredictable emergencies, diversified allocation remains the best approach.