Introduction
For nearly a decade, I've consistently advocated for gold as a strategic asset. Despite initial skepticism—including questions about gold's cyclicality, lack of yield, and competition from cryptocurrencies—my conviction has only strengthened through rigorous research. This article explores the enduring value of gold amidst monetary expansion, geopolitical shifts, and economic instability.
The Monetary Case for Gold
Currency Debasement: A Global Phenomenon
Since the Bretton Woods collapse in 1971, fiat currencies have lost significant value against gold:
- Emerging market currencies depreciated ~90% against the USD
- The USD itself lost ~90% purchasing power versus gold
- Only the Swiss Franc and Singapore Dollar appreciated against the USD since 1990
Key Driver: Central banks monetizing debt (MMT), where:
- The Fed holds >60% of assets in U.S. Treasuries
- Bank of Japan's holdings are even higher
- PBoC currently holds just 4%, suggesting room for growth
"Monetary expansion became the path of least resistance—avoiding reform while creating illusory prosperity." —Li Xunlei
Debunking Common Gold Myths
Myth 1: "Gold Cycles Are Short-Lived"
Historical performance tells a different story:
- 1972–1979: +1,781% (7 years)
- 2001–2011: +644% (10 years)
- 2016–2025: +212% (ongoing)
Myth 2: "Cryptocurrencies Will Replace Gold"
Bitcoin's extreme volatility (e.g., $742 to $85,000 swings) disqualifies it as stable "money." Unlike gold:
- No 3,000-year history as a store of value
- Lacks central bank adoption
- Shows positive correlation with gold prices
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Structural Drivers of Gold Demand
1. Central Bank Accumulation
China: Added 56.93 metric tons (2024–Q1 2025)
- March 2025 alone: +90k oz
- Total reserves: 2,292.33 tons (still low relative to GDP)
2. Geopolitical Hedging
Trump's 2025 policies amplify uncertainty:
- "Reciprocal tariffs" disrupting trade
- Dollar index volatility
- Surging U.S. debt yields
3. The "High Turbulence, Low Growth" Era
Post-pandemic trends favor gold:
- Global GDP growth slowing
- Art market down 40% (2021–2025)
- COMEX gold up ~30% YTD (2025)
Historical Performance Context
| Period | Duration | Return | Subsequent Decline |
|---|---|---|---|
| 1972–1979 | 7 yrs | +1,781% | -69.51% (20 yrs) |
| 2001–2011 | 10 yrs | +644% | -42% (2011–2015) |
| 2016–Present | 9+ yrs | +212% | Ongoing |
Current Bull Market Catalysts:
- Declining confidence in USD hegemony
- Record U.S. debt/GDP ratios
- Multi-polar world emergence
FAQ Section
Q: Why don't productive assets like stocks outperform gold?
A: Gold shines when productivity growth stalls—its zero-yield becomes preferable to negative real returns elsewhere.
Q: How high could prices go?
A: If this mirrors the 1970s bull market (17x), $10,000+/oz isn't implausible.
Q: What's the biggest risk?
A: A sudden return to fiscal discipline—but this seems politically unlikely.
Q: Should I buy physical gold or ETFs?
A: Physical offers crisis insurance, while ETFs provide liquidity. Diversify across forms.
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Conclusion: A Hedge Against Unprecedented Times
With 80 years of post-WWII stability unraveling, gold's role transcends mere inflation hedging—it's insurance against systemic monetary failure. As both ancient money and modern safe haven, its appeal grows precisely when trust in institutions wanes.
Disclaimer: Views expressed are the author's alone (Chief Economist, Zhongtai Securities).