Comprehensive Guide to Gold Investment | Past 20 Years Trend Chart and Future Outlook Analysis

Why Has Gold Become Investors’ Favorite?

Since ancient times, gold has played a vital role in the economic system. Its high density, excellent ductility, and strong preservation qualities make it not only a medium of exchange but also suitable for jewelry and industrial manufacturing. Over the past 50 years, despite fluctuations in gold prices, the overall trend has been steadily upward, with 2025 setting new all-time highs. This long-term bullish characteristic naturally attracts a large number of investors’ attention.

Half a Century of Gold Price Rise — From $35 to $4300

Turning Point in Gold Prices

August 15, 1971, became a pivotal moment. U.S. President Nixon announced the suspension of the dollar-gold convertibility, officially ending the Bretton Woods system. This move freed the dollar from gold backing, allowing it to float freely in the international foreign exchange market. Since then, gold prices have experienced over 50 years of growth, rising from $35 per ounce to about $3700 in the first half of 2025, and recently breaking through $4300 per ounce, an increase of over 120 times. In 2024 alone, the increase exceeded 104%.

Historical Trends of the Four Major Upward Cycles

In the past 50 years, gold prices have gone through four distinct upward cycles:

First Wave (1970-1975): After the dollar was decoupled from gold, market confidence in the dollar waned, and people preferred holding gold. Coupled with the oil crisis leading to increased U.S. money issuance, gold prices rose from $35 to $183, an increase of over 400%. As the oil crisis subsided and confidence in the dollar recovered, gold prices fell back to around $100.

Second Wave (1976-1980): The second Middle East oil crisis and geopolitical turmoil (Iran hostage crisis, Soviet invasion of Afghanistan) drove global inflation. Gold prices surged from $104 to over $850, an increase of more than 700%. However, as crises eased and the Soviet Union disintegrated, gold prices quickly retreated, fluctuating mostly between $200 and $300 for the next 20 years.

Third Wave (2001-2011): The “9/11 terrorist attacks” triggered a global anti-terror war, and the U.S. implemented rate cuts and debt issuance to support military spending. These policies led to a housing bubble, followed by rate hikes that triggered the 2008 financial crisis, prompting the U.S. to launch QE (Quantitative Easing). Gold prices soared from $260 to $1921, an increase of over 700%, over a span of 10 years. After the European debt crisis in 2011, gold gradually stabilized around $1000.

Fourth Wave (2015-present): Over the past decade, gold prices experienced a new rally. From $1060 in 2015 to over $2000. Factors include Japan and Europe implementing negative interest rate policies, global de-dollarization, U.S. QE in 2020, the Russia-Ukraine war in 2022, and conflicts in Israel-Palestine and the Red Sea crisis in 2023. 2024-2025 witnessed epic gold price movements, with prices reaching over $2800 per ounce in October, creating unprecedented peaks, and continuing to set new records.

Comparing Gold and Other Asset Returns

50-Year Investment Returns

Since 1971, gold has increased by 120 times. During the same period, the Dow Jones Index rose from 900 points to around 46,000 points, a gain of about 51 times. From this long-term perspective, gold investment returns are not inferior to stocks, and may even outperform.

Fundamental Differences in Return Sources

• Gold: Returns come from “price difference,” with no interest generated. Success depends on timing of entry and exit.
• Bonds: Returns come from “interest payments,” requiring increased holdings to boost income, often influenced by central bank policies.
• Stocks: Returns come from “corporate growth,” suitable for long-term holding of quality companies.

Difficulty Ranking of Investment Types

In terms of difficulty: bonds are easiest, gold is next, stocks are the hardest. However, over the past 30 years, stocks have performed the best, followed by gold, with bonds at the bottom.

Practical Investment Strategies for Gold

There are five main ways to invest in gold:

1. Physical Gold
Direct purchase of gold bars and other physical gold. Advantages include good asset privacy and the ability to wear jewelry; disadvantages are inconvenience in trading.

2. Gold Passbook
Similar to a gold custody certificate, where the passbook records your holdings and can be redeemed for physical gold when needed. Advantages include portability; disadvantages are no interest from banks, large bid-ask spreads, suitable only for long-term holding.

3. Gold ETFs
More liquid than passbooks, making trading more convenient. After purchase, you hold shares that reflect the amount of gold ounces owned. The issuer charges management fees, and if gold prices remain stagnant long-term, the value will slowly erode.

4. Gold Futures and Contracts for Difference (CFD)
The most common tools for retail investors. Both futures and CFDs are margin trading, with low costs. CFDs are more flexible, with higher capital efficiency, especially suitable for short-term trading. Compared to futures, CFDs offer more flexible trading hours, smaller account sizes, and are more accessible for small investors and retail traders.

5. Gold Funds
Invest indirectly through fund companies managed by professional teams.

Core Characteristics and Risk Tips for Gold Investment

Nonlinear Price Movements

Gold prices do not rise steadily but go through multiple cycles. For example, between 1980-2000, gold hovered in the $200-$300 range for a long time. Investing during this period would yield nearly zero returns. This explains why gold is more suitable for swing trading rather than long-term buy-and-hold.

Long-term Price Bottom Rising Pattern

As a natural resource, the cost and difficulty of gold mining increase over time. Therefore, even after a bull market ends and prices retrace, the lows will gradually rise, indicating gold will not become worthless. Investors should understand this pattern to avoid ineffective operations.

Optimal Asset Allocation Strategy

Economic Cycles and Asset Selection

The basic principle is: Invest in stocks during economic growth, and allocate gold during recessions.

When the economy is booming, corporate profits are good, and stocks tend to rise; bonds and gold are less favored due to low yields. Conversely, during economic downturns, stocks lose appeal, and gold’s hedging qualities along with bonds’ fixed income become safe havens.

Diversified Allocation as a Risk Buffer

Given the market’s volatility and sudden geopolitical events (such as Russia-Ukraine war, inflation, rate hikes), holding a moderate proportion of stocks, bonds, and gold can offset each other’s risks, making the investment portfolio more resilient.

Gold Price Outlook for the Next 50 Years

Will the long-term bullish trend of gold over the past 50 years repeat in the next 50 years? It depends on global economic policies, geopolitical developments, and the dollar’s status. Currently, central banks are increasing gold reserves, the dollar is weakening, and geopolitical risks are rising, supporting high gold prices in the medium term. However, investors should recognize that gold is a cyclical asset and should not expect perpetual upward movement. Capitalizing on bullish trends or short-term dips through long or short positions is the correct approach to gold investment.