Why is gold a great asset to own

There was some interesting discussion about gold investment in the WeChat group. Indeed this is the most controversial area but I think there is some misconception about it. For gold, I totally agree that in general this is not something you should buy and hold for life as investment. Rather it should be held for the purpose of keeping the purchasing power of your money. I have seen very reliable research that demonstrated that for hundreds of years, the purchasing power in terms of gold has remained very constant. But I guess we all can agree we cannot say this at all for the paper money. The fiat money is simply a toy of the government and they love to play the toy to devalue it. Since the birth of the US$, over 99% of its purchasing power has been lost. Just think about how much less you can buy with it in the past few years when from the government CPI there has been virtually no inflation. From this perspective, I personally think that everyone should at least save some of your money via some physical gold. It is becoming more important now when all the governments around the world are competing for debasing their currencies. In this situation, only gold will shine!

Having said that, it dose not mean you can make some money by trading for gold but it must be done at a appropriate time. As for any commodities, gold investment is also cyclic and will go up and down via cycles. If you trade for gold at the wrong time, you will definitely lose money. But if you buy it at the right time, you can make really great money. The current gold bull trend started around 2000 and it had being going up every year for 13 years. No any other assets have this kind of track record. With this kind of long-term bull run non-stop for 13 years, any bull should stop to take a rest. This is something gold has been doing for the past 3 years and has corrected by almost 50% from its all time high of $1900 to $1000. But even with this scarily correction, gold has outperformed S&P by a huge margin: gold has appreciated by 300% since 2000 but S&P has gone up just about 50%. So I don't know how people can still say gold is not a great investment in the past 15 years. 

The real question is whether the current gold bull trend had ended 3 years ago when it reached to its all time high of $1900. Of course no one knows for sure but personally I'm convinced that gold has a lot more upside to go, much higher than $1900 when we finally see its top. I'm holding this view based on a few key points:

• As I mentioned above, all the countries are trying to devalue their currencies. This is a trend that will continue for quite some time given the current messy economies around the world and this is hugely positive for gold. Yes, the gold price is struggling at the moment based on US$ but if you look at gold via other currencies, gold prices have been keeping going up on almost any other currencies. In other words, you will not see a gold correction if you price gold in non-US$ currencies.
• Now we see more and more countries go negative interest around the world. Again, gold will continue to shine in the negative interest environment. I don't see this trend will reverse any time soon.
• Although sounds scarily with a nearly 50% correction, this is actually not abnormal at all for gold when it is in its uptrend. The last gold bull trend occurred in 70s-80s and the a bit more severe correction also occurred around that time. During the whole course of this bull run, gold went up parabolic from $35 to $800, a 22 times jump. But before its final running up, gold got haircut by half from $200 to $100 and only when almost everyone had lost faith of gold by this crash, gold started its epic final moonshot!
• As Merrill Lynch has famously said, bull will die during euphoria. Now did you see or feel any euphoria when gold went up to $1900 three years ago? I didn't see people lining up outside of gold shops to buy gold and I didn't encounter anyone who recommended me to buy gold at that time. This was exactly what had happened in 2006/2007 about the real estate that I saw the ads that invited people to go for free from New York to Florida to buy houses. And I also heard taxi drivers were talking about how to make money by buying houses! For gold, actually I even did some test in my office that I asked several times my colleagues whether anyone had bought any gold. Among about 10 people from different countries, none had bought any gold even when gold was almost like going up non-stop for years! I don't think this is a topping process for gold that we typically should have seen. Such a time will come when gold truly tops and that's the time anyone buying gold for investment should get out. But I don't think we are at that moment at present and it may be many more years away from now.