Gold has demonstrated significant gains this year, repeatedly setting new record highs. Over the long term, gold has proven to be a highly worthwhile investment. Some have even compared gold's performance to that of Berkshire Hathaway, the company led by Warren Buffett. Extending the timeline reveals that over the past two decades, gold's appreciation has surpassed the returns from the famed investor's stock.

Comparing gold to other major investment vehicles provides further insight. First, consider real estate, a favorite among Chinese investors often seen as a means to upward mobility. Using Shanghai property as an example, a unit in the Gubei Central Garden development was priced at 15,000 yuan per square meter in late 2002 and now sells for 110,000 yuan. This represents a 733% increase, translating to an annualized return of 9%. In contrast, gold was priced at 63 yuan per gram in late 2002 and now trades near 970 yuan per gram, a gain of 1540% with an annualized return of 12.6%. Even when purchasing Shanghai property before its major surge, the returns are comparable, with gold's performance slightly superior.

Next, compare gold to the U.S. stock market, widely regarded as a premier equity market globally. The Nasdaq index stood at 1400 in late 2002 and has since risen to 22,670, a gain of 1619% and an annualized return of 12.9%. Gold's performance over the same period, with a 1540% increase and a 12.6% annualized return, is remarkably similar. This is compared to the world's leading stock market. When measured against the A-share market, the difference is stark. The Shanghai Composite Index was at 1358 in late 2002 and now sits near 3840, a gain of only 282% with an annualized return of 4.6%, significantly lower than gold's returns. This calculation is based on the current higher index level; a correction below 3300 would make the performance appear even weaker. Overall, gold's returns over the past 20 years are comparable to those of Chinese real estate and U.S. stocks—the two best-performing assets during that period—and substantially outperform other investments.

The fundamental logic for gold's appreciation is straightforward: it thrives in times of turmoil. Historically, every major gold bull market has occurred during periods of instability. The adage "buy gold in troubled times, antiques in prosperous times, and stockpile grain in famine" holds considerable truth. However, historical trends alone are not a sufficient basis for recommending any asset. Assets like U.S. stocks, gold, baijiu stocks, and real estate have demonstrated long-term growth, but blind, long-term holding does not guarantee profits. Everything is cyclical, and understanding the cycle is crucial before investing in any asset.

U.S. stocks: While exhibiting long-term growth over a 100-year horizon, they experienced a 13-year period of stagnation from 1965 to 1978, with annualized returns below 1%. Gold: Since 2000, gold has risen 16-fold, but it declined over 60% between 1980 and 2000, leaving investors locked in for two decades. Baijiu stocks: Favored by value investors in the A-share market, these stocks have fallen nearly 60% from their 2021 peak and have yet to find a bottom. Real estate: After a 30-year bull market, it began a rapid decline post-2022. The reality for these assets is not just that they are cyclical, but that their cycles are exceptionally long. Entering during a downtrend can lead to being trapped for years, or even decades. Successful investment still requires understanding the underlying drivers and accurately assessing the current position within the cycle. Only after confirming a long-term upward trend can one hold an asset with confidence, avoiding unnecessary trading.

The core reason for a bullish outlook on gold is the belief that the next decade, at a minimum, will constitute a bull market cycle for the metal. A gold bull market is essentially a manifestation of a disordered world. Since 2020, global economic and geopolitical instability has intensified, marked by the U.S.-China trade war, U.S. stock market crashes, supply chain crises, global oil crises, food crises, rampant inflation, the Russia-Ukraine war, and Middle Eastern conflicts. In such turbulent times, with widespread economic decline, few assets retain investment appeal, driving capital towards gold.

A second logic for gold's appreciation lies in its finite supply, which appears to be nearing a bottom. The total amount of gold on Earth is fixed. Humanity has already mined approximately 210,000 tonnes, with proven reserves of nearly 60,000 tonnes remaining. The rest lies largely in the oceans, but at such low concentrations that extraction with current technology is unprofitable and purification is challenging. It is this inherent scarcity of a finite resource that underpins its value and potential for price increases. This principle is analogous to the Shanghai property market, where prices for mass-market二手房 (secondary homes) are falling sharply, yet luxury properties in the city center continue to hit new highs due to their scarcity, unlike the abundant supply of older, smaller units.

These are gold's two most fundamental investment rationales: its finite supply makes it a scarce asset with intrinsic value, and its safe-haven attribute causes it to appreciate during periods of uncertainty.

Beyond these primary drivers, two secondary factors are providing short-term support for gold prices. The first is U.S. interest rate cuts. The unique status of the U.S. dollar as the world's reserve currency means U.S. monetary policy naturally influences global commodities like gold. Although the dollar is no longer directly pegged to gold, a close relationship remains. Typically, gold prices fall during U.S. rate-hiking cycles and rise during easing cycles. The logic is simple: lower interest rates reduce the cost of borrowing dollars, increasing the money supply. This excess liquidity fuels inflation, which in turn impacts gold. Currently, the U.S. is in a rate-cutting cycle, a trend mirrored by many other nations amid a sluggish global economy. With ample capital and a lack of attractive alternative investments, funds flow into gold, pushing its price higher.

The second secondary factor is increased buying by global central banks. For the past two decades, central bank gold reserves remained relatively stable. However, over the last two years, central banks have become significant purchasers. According to the World Gold Council, global central banks bought 1,045 tonnes of gold in 2024, accounting for 21% of total annual gold demand (4,974 tonnes). This represents an increase of nearly 60% compared to 2019 levels. The rapid growth in central bank purchases (up 60% from pre-pandemic times) and their substantial share of the market (21% of total demand) have made them a major force influencing gold prices. Their sustained buying provides clear upward pressure.

Looking ahead, does gold have further room to rise? As long as central banks continue to lower interest rates and inject liquidity, as long as international tensions persist, and as long as central banks maintain their gold accumulation programs, gold possesses significant upside potential. This is a medium to long-term perspective, not swayed by short-term price fluctuations.