The investment logic behind the 50-year 120-fold increase in gold prices

Gold has always been an important player in the trading market. Its high density, excellent ductility, and strong preservability allow it to be used as currency, jewelry, or industrial products. Over the past half-century, despite continuous fluctuations in gold prices, the overall trend has been clearly upward, especially after 2025, reaching new all-time highs.

Will this 50-year bullish trend repeat in the next 50 years? What is the investment logic behind gold prices? Is it suitable for long-term holding or short-term trading?

The 50-Year Gold Price Trajectory After the Collapse of the Bretton Woods System

In 1971, Nixon announced the detachment of the US dollar from gold, marking the beginning of modern gold price history. From the then-price of $35/ounce to surpassing $4,300/ounce in October 2025, gold has increased over 120 times. What kind of growth story is this?

Looking at the gold price chart from 1971 to today, there are four distinct upward phases in the cycle.

First Wave (1970-1975): From $35 to $183

After the dollar was decoupled from gold, public doubts about its value led to increased gold purchases. Subsequently, the oil crisis triggered a second wave of price increases as the US increased money supply. However, once the crisis eased, the market recognized the convenience of the dollar, and gold prices retreated to around $100.

Second Wave (1976-1980): From $104 to $850

The second Middle East oil crisis, the Iran hostage crisis, the Soviet invasion of Afghanistan, and other geopolitical events drove global inflation higher, causing gold to surge again. This over-speculation quickly receded after the crises eased, and for the next 20 years, gold mostly fluctuated between $200 and $300.

Third Wave (2001-2011): From $260 to $1,921

The 9/11 attacks triggered a decade of global anti-terror efforts. The US lowered interest rates, issued debt, and implemented QE. The 2008 financial crisis reignited QE waves. This bullish trend lasted 10 years, peaking during the European debt crisis in 2011, then stabilized around $1,000 due to policy interventions.

Fourth Wave (2015-present): From $1,060 to surpassing $2,000 and continuing to set new highs

Negative interest rate policies, global de-dollarization, multiple rounds of QE, geopolitical conflicts (Russia-Ukraine war, Israel-Palestine war), and other factors have collectively driven gold prices higher. Starting in 2024, the momentum accelerated, with annual gains exceeding 104%, and in 2025, amid multiple risks, prices continued to break historical records.

Gold vs Stocks vs Bonds: Who is the Real Winner?

Many investors ask: with gold rising 120 times over the past 50 years, does that make it the best investment tool?

Data shows that from 1971 to 2025, the Dow Jones Index rose from 900 points to 46,000 points, an approximately 51-fold increase. This indicates that in terms of long-term returns, gold has indeed outperformed stocks. However, if only looking at the past 30 years, stock returns have been even better, followed by gold, with bonds performing the worst.

The sources of returns for these three assets are fundamentally different:

• Gold: purely from price differences, no yield, requires trend-following
• Bonds: rely on interest payments, stable income but limited growth
• Stocks: from corporate growth, with the greatest long-term potential but the highest volatility

Difficulty ranking for investment: Bonds easiest, gold next, stocks hardest.

When to Buy Gold? Economic Cycles Decide Everything

The core logic of investing in gold is not blind long-term holding but allocation based on economic cycles.

Economic growth phase: corporate profits improve, stocks dominate, gold is relatively neglected
Recession phase: stocks underperform, this is when gold’s hedging and safe-haven features attract capital

The gold price trend over the past 50 years clearly shows that the largest gains often occur during economic crises or geopolitical turmoil. Therefore, from a swing trading perspective, gold is most suitable for entry under the following conditions:

• During geopolitical escalation, go long
• When central banks cut interest rates or implement easing policies, go long
• When the US dollar index weakens, go long
• During sharp declines in gold prices, go long

Not simply buy and hold for 20 years.

Ways to Invest in Gold

Depending on trading style and capital scale, the following five methods are available:

1. Physical Gold: buy gold bars or jewelry, advantages include asset concealment, disadvantages include inconvenient trading

2. Gold Certificates: bank custody receipts, portable but limited liquidity, large bid-ask spreads

3. Gold ETFs: better liquidity, suitable for investors wanting direct gold trading in stocks, but with management fees

4. Gold Futures: leverage to amplify gains, suitable for professional investors

5. Gold CFDs (Contracts for Difference): low capital entry, flexible two-way trading, T+0 trading without day/night restrictions, ideal for retail short-term trading

For small investors, CFDs are popular due to flexible leverage, low minimum deposits (as low as $50), low transaction costs, and fast execution. With just 0.01 lots, you can participate in gold trading.

Risks of Investing in Gold

History shows that gold does not only go up. Between 1980 and 2000, gold prices hovered between $200 and $300 for 20 years, meaning no returns during that period. How many 50-year spans do we have in life to wait?

Therefore, gold is most suitable for swing trading rather than buy-and-hold. But it’s important to recognize that even after a bull run ends and prices fall back, due to increasing extraction difficulty and costs, each subsequent low point tends to be higher. In other words, gold may retrace but will not fall endlessly; this is the essence of its value-preserving nature.

Rational Asset Allocation Plan

In the face of rapidly changing markets and unpredictable political-economic events, relying on a single asset is too risky. A smarter approach is to allocate a portfolio of stocks, bonds, and gold according to individual risk tolerance:

• Aggressive: 70% stocks, 20% gold, 10% bonds
• Balanced: 50% stocks, 30% gold, 20% bonds
• Conservative: 30% stocks, 40% gold, 30% bonds

When the economy is strong, tilt toward stocks; during downturns or political instability, increase gold allocation. This way, you can enjoy economic growth benefits while protecting assets during crises.

Conclusion: Gold is an investment tool, not a financial product. The key is not long-term holding but understanding its price movement logic and making correct decisions at the right times.