Gold's 50-year increase of 120 times | From Bretton Woods to the 2025 all-time high, can the next cycle still rise?

Gold Investment Basics: Five Major Approaches

Want to participate in the gold market but don’t know how to start? Actually, there are more than one way to enter the gold market.

Physical Gold is the most direct method. Buying gold bars or jewelry allows for direct ownership. Its advantages include strong asset privacy and stable liquidity, while disadvantages are inconvenient transactions and higher storage costs.

Gold Passbook is similar to the early US dollar certificate system, recording gold holdings through bank accounts. Redeeming for physical gold or topping up is very convenient. However, banks do not offer interest income, and the buy-sell spread is relatively large, making it more suitable for investors looking at long-term trends.

Gold ETFs improve the liquidity issues of passbooks by holding corresponding gold positions in stock form. Trading is more convenient but involves management fees from the issuing company. If gold prices remain stagnant long-term, ETF value will gradually decline.

Gold Futures and Contracts for Difference(CFD) are the most commonly used tools for retail investors. Both adopt margin systems to reduce trading costs and offer leverage to amplify returns. For short-term traders, CFDs are favored due to their high flexibility and low capital threshold.

Interpreting Fifty Years of Gold Price Rise: From $35 to $4300

August 15, 1971, was a pivotal moment. U.S. President Nixon announced the dollar’s detachment from gold, officially ending the Bretton Woods system. Before that, the international trade system fixed 1 ounce of gold at $35, effectively making the dollar a gold certificate. After the detachment, this rule was broken, and gold entered a free-floating era.

Over half a century, gold prices experienced four distinct bullish cycles:

First Wave (1970-1975): Confidence in the dollar wavered after the detachment. Gold soared from $35 to $183, a rise of over 400%. Later, due to the oil crisis and increased US money issuance, a second wave pushed prices higher. After the crisis eased, gold retreated to around $100.

Second Wave (1976-1980): The second Middle East oil crisis and geopolitical events like the Soviet invasion of Afghanistan triggered a global recession and soaring inflation in Western countries. Gold surged from $104 to $850, an increase of over 700%. This overheat was followed by a rapid decline after the crisis subsided and the Soviet Union disintegrated, with prices oscillating between $200-$300 for the next 20 years.

Third Wave (2001-2011): The 9/11 attacks shattered global security expectations. The US launched a decade-long anti-terror war and increased debt. To fund military expenses, the US cut and then raised interest rates, culminating in the 2008 financial crisis. Quantitative easing (QE) boosted gold from $260 to $1921, a 700% increase. After the European debt crisis peaked, gold gradually stabilized around the thousand-dollar mark.

Fourth Wave (2015-present): The past decade’s factors driving gold prices are complex and diverse—negative interest rate policies in Japan and Europe, global de-dollarization trends, US QE, Russia-Ukraine conflict, Middle East tensions, and more. In early 2024, gold prices began a strong rally, breaking through $2800 for the first time in October, setting a new record high. As 2025 approaches, ongoing Middle East tensions, US tariff policies causing trade worries, a weakening US dollar index, and other positive factors continue to push gold higher, reaching the $4300 mark.

Overall, from 1971 to now, gold has appreciated by up to 120 times. In 2024 alone, the increase has exceeded 104%.

Gold vs Stocks vs Bonds: Who Offers Higher Returns?

To evaluate the attractiveness of gold investment, it must be considered within the broader asset allocation framework.

Looking over 50 years, gold’s 120-fold increase is impressive, but during the same period, the Dow Jones Industrial Average rose from around 900 to over 46,000 points, a roughly 51-fold increase. Numerically, gold outperforms, but this ignores a key fact: Gold’s gains are not steady or linear.

Between 1980 and 2000, gold prices stagnated around $200-$300, offering no interest income. Anyone who bought gold during that period effectively wasted two decades. How many people have 50 years to wait?

In the last 30 years, stock returns have actually surpassed gold, with bonds trailing behind. The profit logic for each asset class is entirely different:

• Gold gains from price differences, with no fixed yield; timing of entry and exit is crucial.
• Bonds generate income through interest, stable but with low yields, requiring judgment based on central bank policies.
• Stocks grow through corporate expansion, hardest to master but with the greatest long-term potential.

Therefore, in terms of investment difficulty: bonds are easiest, gold is next, stocks are the hardest.

Is Gold Suitable for Long-term Holding or Swing Trading?

This is a subjective question. My view is: Gold is a very good investment tool, but it is inherently more suitable for swing trading rather than purely long-term holding.

Gold’s price movements follow a clear pattern: often experiencing a major bullish run, then a sharp correction, followed by consolidation, and finally restarting a new bull phase. Accurately capturing the bull runs or shorting during sharp declines can yield returns far exceeding bonds or stocks.

Another observation is that, due to gold’s natural resource nature, mining costs and difficulty increase over time. Even after a bull run ends and prices decline, the lows of each correction tend to rise gradually. In other words, when investing in gold, don’t be overly pessimistic; even declines have a bottom. Recognizing this pattern helps avoid unnecessary trades.

Asset Allocation Strategy: When Should You Allocate to Gold?

Gold, stocks, and bonds each have their roles. The key is to judge the economic cycle.

Generally, during periods of economic growth, prioritize stocks; during recessions, allocate to gold. When the economy is doing well, corporate profits rise, and stocks tend to go up. Conversely, during downturns, corporate profits fall, and the value of gold and bonds as hedges and safe havens becomes more attractive.

The most prudent approach is to pre-set asset allocation ratios based on personal risk tolerance and investment goals. Events like the Russia-Ukraine war, global inflation, and interest rate hikes are classic examples of sudden changes. Holding all three asset classes can effectively offset risks from volatility in any single asset, making the portfolio more resilient.

50 Years of Gold Trends: Will the Next Cycle Continue?

Reviewing the past 20 years of gold price charts, the leap from $1000 to $4000 is impressive. But will this rally continue into the next 50 years?

Factors supporting continued growth include: central banks increasing gold reserves, ongoing geopolitical risks, and economic uncertainties. However, moderation is necessary—history shows that gold prices are not always smooth sailing; they will experience corrections and consolidations.

The wisest investment attitude is: neither overly optimistic ignoring risks nor abandoning opportunities due to short-term fluctuations. Adjusting positions flexibly according to market conditions and seizing swing opportunities is the right approach for gold investment.