Should You Buy Gold or Stocks Right Now?
The core of long-term investment lies in navigating economic cycles, and the performance and risk profiles of these two assets, like the structure and navigation system of a ship, determine the stability of the voyage and its ultimate destination.
From a stability perspective:
- Gold: As a safe-haven asset, gold offers strong value preservation and inflation protection. During periods of economic instability or financial market turmoil, gold often performs well, providing investors with a relatively stable source of income. Furthermore, gold's global liquidity and market recognition make it relatively easy for investors to buy, sell, and transfer gold assets.
From a profitability perspective:
- Stocks: Although stock prices fluctuate significantly, over the long term, their returns tend to be higher than those of gold. Especially during economic booms, the stock market can offer investors substantial returns. However, this requires a high risk tolerance and sufficient investment knowledge.
From a risk perspective:
- Stocks: The stock market is generally more volatile, requiring investors to accept significant price fluctuations and market uncertainty.
- Gold: In comparison, gold investment offers lower risk, and its price doesn't experience the extreme volatility of stocks. However, it's important to note that gold prices are also affected by factors such as international politics and economic conditions.
Inflation Cycle Hedging
During the Great Inflation of the 1970s, US stocks experienced negative real returns for ten years, while gold prices rose more than tenfold during the same period. This extreme divergence reveals the essential roles of these two assets: gold acts as "economic bulletproof vest," its value store becoming more prominent when the purchasing power of money declines; stocks act as "economic growth sensors." In the long term, companies can pass on costs through price increases, but this will require painful profit adjustments. Gold's strong performance in 2024 is, to some extent, a delayed response to the continued monetary easing by global central banks.
However, gold's inflation-fighting potential has a shelf life. Historical data shows that stocks tend to outperform gold in an environment of moderate inflation (3%-5%); gold only maintains its lead once inflation exceeds the 6% threshold. This is like chemical substances that are more active at different temperatures—stocks are most active at an economic temperature of 37°C, while gold shines brightly at a feverish 40°C.
Investment Advice:
When choosing between investing in stocks or gold, investors should evaluate and make their choice based on their risk tolerance and investment objectives. If you're seeking high returns and can tolerate higher risks, investing in stocks may be more suitable; if you prioritize asset preservation and stability, investing in gold may be a better choice. To diversify risk, investors can also consider a reasonable combination of stocks and gold.