Transcription
Last month, during a live economic analysis broadcast, the host brought up a price chart. On that chart, the year was not specified. There was only a line graph plummeting straight down from a peak. At the other end of the line, a distinguished gentleman over 70 years old stared at that graph for just a few seconds and then spoke a sentence that instantly silenced the entire live room. He said, "I remember this graph precisely and clearly, because in that year I held a long position with full profit across my portfolio." Friends, that graph was the gold price chart from 51 years ago. And this distinguished gentleman is none other than Roon, the man whom the European and American financial circles revere as the godfather of resource stocks. He is a war veteran who has been active in the mining investment industry for over 50 years.
He said that the sharp decline of gold this time did not remind him of anything else except the period from 1974 to 1976. How brutal was the market back then? Gold fell by half—a full 50% disappeared. Then, at the moment when everyone had lost hope and given up the most, the price turned around and surged 8 times. Hearing this, I believe a question has already popped up in your mind: How could it fall 50% and then rise 8 times? Don't be impatient. Today, I will delve deeply into both of these questions until they are completely clear. But I want to tell you in advance that the most important point of this story is not the 50% drop, nor the 8-fold rise. It is the period after the surge. That is the ending that lasted as long as 28 years, which almost no one wants to talk about. You must understand that 28-year period first before you can distinguish whether the words of this godfather are actually advice or a warning.
Longtime fans of the show probably still remember that in the last clip, we talked about another elderly man—Robert Kiyosaki, the author of "Rich Dad Poor Dad." Within just one week, he changed his perspective from up to down and from down to up three times, becoming a terrible example. But today, Grandpa Roon and Kiyosaki have a combined age of over 150 years. What is interesting is that both of these senior gentlemen have an astonishingly aligned view on the long-term direction of gold. The main direction is upward, and it is a rise that will multiply many times over. The target that Mr. Kiyosaki mentioned later is $35,000. As for Grandpa Roon's number, it seems much more gentle. He said last year that before 2035, we will see a level of $10,000–$12,000. They both see an upward trend, but the numbers differ by three times. Whom should we believe? My answer may surprise you: Don't rush to believe those numbers at all, because what these two men are offering you are not the same thing at all. What Mr. Kiyosaki gives you is numbers, and those numbers can change—yesterday they could change, today they can change, and tomorrow they can change again. But what Grandpa Roon offers is a map. It is a historical map that he himself has walked through with real cash—real pain, real gains. Numbers can change, but the map never changes.
Let me briefly recount the history of this godfather to show why he is worth your 10-plus minutes of listening to his past stories. The drama of his life is even more thrilling than a price chart. In his youth, he was a bodyguard and a driver in Kuwait, then he stumbled into the gold industry. This coincided perfectly with the great bull market of the 1970s, making him enormously wealthy at a young age. And then what? After that, he mistakenly thought that the bull market was a result of his own brilliance. Those are his own words. When the commodity market collapsed in 1982, he returned all his profits back to the market and ended up deeply in debt. The annual goal he set for himself that year—you might not believe it—was simply to get back to a point where he was not in debt. And from climbing out of that trap, he became a battle-hardened veteran of contrarian investing, always reminding everyone about discipline. His signature phrase, repeated for decades, is: "Buy when there is maximum hatred, and sell when there is love that is too loud."
So you see, this godfather is not someone who has never been taught a lesson by the market. On the contrary, he grew up from being beaten by the market. The map that a person like this pulls out to show you is a completely different thing from the target prices that analysts casually throw around. Today, we will unfold this 51-year-old map and look at it step by step. The starting point of the map is a peak that looks eerily similar to today. The story begins in late 1974. At that time, there was huge good news coming for the United States: from the last day of 1974, American citizens would be able to legally hold gold again. You have to understand that since President Roosevelt ordered the confiscation of citizens' gold in 1933, Americans had not been able to openly hold gold bullion for a full 41 years. How did the market react? Demand that had been suppressed for over 40 years was released all at once. How could the gold price not skyrocket? So capital poured in, pushing gold prices higher and higher until the end of December 1974, when the price surged to near $200, setting a historic record at that time.
And what was the result? When the legalization officially took effect, the anticipated gold-buying frenzy never happened. Americans looked at the price, shrugged, and went to work as usual. This picture should be familiar to fellow investors: it's like when a famous dessert shop opens, people queue endlessly out to the main road, and everyone thinks it will be popular forever. But when identical shops open all over the street overnight, the trend fades. The day the good news actually arrives is often the day the good news loses its power. Gold 50 years ago stumbled right at this point. What made it even more complicated was that the U.S. Federal Reserve was doing something else simultaneously. In the early 1970s, Nixon canceled the exchange of dollars for gold, followed by the first oil crisis, which ignited commodity prices. U.S. inflation became a national political issue for the first time. Housewives went on TV to complain about expensive vegetables; labor unions marched to demand higher wages. Under political pressure, the Washington government had to allow interest rates to soar. What are high interest rates? They are the arch-enemy of gold. If you hold a gold bar, it yields not a single cent of interest, while government bond returns kept rising. As a result, gold prices began to slowly decline from the peak near $200. It was a gradual decline that lasted as long as 20 months. This kind of decline is mentally torturous. It didn't collapse all at once but slowly seeped down—down a bit today, down a bit tomorrow, like having your blood drained slowly.
By the end of August 1976, the price had fallen to $100, exactly half. What was the market atmosphere like back then? It was filled with voices saying gold had no future. Since everyone could buy it legally, the mystery was gone. With interest rates this high, the holding cost was obvious—who would want this non-yielding rock? Grandpa Roon was also in this battle. He held a full long speculative position, clinging to it from the peak all the way down to the bottom. Later, recalling this period, he spoke a sentence that became widely spread: "In a long-term bull market, it is always possible to have severe cyclical corrections, and it doesn't change anything." It's easy to say, but that calmness came after it was over. The pain at that time was known best only by his account statement. The key point is here: the turning point of the story has arrived, and the turning point did not come from the market but from the Washington government—the antidote called high interest rates. It can cure the disease, but it has a much larger side effect. The long-term bond market was crushed flat, the stock market was battered, new homes couldn't be sold, cars couldn't be sold, and industries dependent on credit were wailing. Grandpa's words explained it vividly: "The experiment went into the ninth month, and Congress lost all their courage. They forced the Fed to reverse course and start cutting rates." This is like going to the dentist: the doctor insists you must finish the full course of antibiotics, but after nine days, you feel the swelling is gone and decide to stop the medicine yourself. Did the bacteria die completely? No, they are just waiting for an opportunity to come back, and when they return, they will be more vicious than the first wave. And this bacteria called inflation did come back, and it brought friends.
In 1979, the Iranian Revolution ignited the second oil crisis. Oil prices surged again, and U.S. inflation shot past 13%. This time, the market was no longer pretending, and it was no longer confident. Paper money in hand was losing value every day, so people had to go to the oldest store of value in 5,000 years: gold. Gold began to climb from the low of $100. At first, it crawled along. It crawled and crawled, then started to jog. By the second half of 1979, it entered a full sprint. In November, the Iran hostage crisis occurred—52 Americans in the embassy were taken hostage. In December, the Soviet Union sent troops into Afghanistan. The gunpowder smell of the Cold War permeated the world. Two barrels of oil were thrown onto the fire, and gold erupted wildly. In the last three months, the price rose almost in a straight line. At its most frenzied, the price jumped by $50 in a single day. In America, in front of coin shops on the streets, people were queuing in long lines. Observe carefully: the crowd that did not line up on the first day gold became legal reappeared at the peak at $850 five years later. Human nature never gets greedy when things are cheap; they only chase when the market is crazy. Finally, on January 21, 1980, it closed at $850. From $100 to $850, an increase of 8.5 times, taking only three and a half years. Meanwhile, the group of people who had lost hope and cut their losses and walked out of the market when the price was around $100 did not taste any of that 8.5-fold profit.
Hearing this, you might start feeling your blood pumping: after falling 50%, it rose 8 times. So, does that mean the current 30% drop is a freebie test for gold? Don't get excited yet. The godfather says both market periods are extremely similar. But where are they similar? We need to take out a magnifying glass and examine each layer, comparing them clearly, so you can know how much opportunity and how many pitfalls are in his words. Layer one: The point that ignited the fire is the same—inflation escalating into a political issue. In 1975, for the first time in U.S. history, inflation became an election campaign issue. The political class was forced to raise interest rates. And what about today? Commodity prices over the past two years have once again become the most painful point for Americans. The Fed, under Powell's leadership, has turned hawkish. Interest rate hikes have been put back on the table. As a result, gold prices fell from the all-time high of $5,602 on January 29, sliding until it broke the $4,000 support in late June, with the low at $3,943. From the peak, that's a drop of nearly 30%. The second quarter was the worst quarterly performance in 13 years. The method of igniting the fire is exactly the same—this box can be checked.
Layer two: The list of casualties is the same. The godfather reminds us of a small detail that is always overlooked: what collapsed in 1975 was not just gold. The long-term bond market was destroyed, the stock market was battered, and big-ticket items dependent on credit, like new homes and cars, all collapsed. Raising interest rates never picks targets; it is a broad attack. Gold is just the most prominent casualty. And what about today's list? U.S. government bond yields are sky-high, bond investors' account balances are bleeding red, interest-sensitive assets are surrendering, and even investment banks are starting to cut their numbers. Bank of America just reduced its gold price target from $6,000. This casualty list can be roughly checked too. But let me add an observation next to this box. This point is very important: in today's battlefield, there is a new player that did not exist in 1975. That player is the central banks of various countries. In just the month of May this year, central banks around the world net purchased 41 tons of gold. The latest report from the European Central Bank points to something unprecedented in history: the proportion of gold in global central bank reserves has surpassed that of U.S. government bonds. In 1975, when gold fell by half, no one was there to catch the falling knife. But this time, below, there is a line of buyers using national-level accounts waiting to receive the goods. Whether this observation will be fortunate or unfortunate, remember it for now. Watch until the end, and the answer will come.
Layer three: The conclusion that politics will eventually lose its courage. This layer is the heart of the godfather's entire logic and is the only layer among the four that has not yet occurred. Why is he so confident that the Washington government will not endure again? He gives a simple math problem: the debt on the U.S. government's balance sheet is about $40 trillion. Off the balance sheet, there are legally promised obligations like Social Security, Medicare, and pensions, totaling about $120 trillion. Combined, that's $160 trillion. And the total net worth of all Americans? About $172 trillion. What does that mean? It means that if you gathered all the assets of every household in the country together, it would barely be enough to pay off the government's debts. After paying, only loose change would remain. Such a massive debt cannot be repaid by tightening belts. Defaulting is not an option—it would destroy the credibility of the dollar. So there is only one way left: print money, inflate it, and dilute the debt year after year. Therefore, the godfather spoke a very harsh sentence: "This has nothing to do with who holds power. Whether you are Biden, Trump, Powell, or Greenspan, the math dictates that in the end, we must return to the old path—deliberately keeping interest rates low combined with quantitative easing (QE)." He also predicts the outcome: in the next 10 years, the dollar will lose 75% of its purchasing power. We already did this once in the 1970s. Hearing this, some friends must be raising their hands and asking, "Hey, isn't the dollar index looking strong right now?" The godfather says you are looking at the wrong gauge. The dollar index measures relative performance between the dollar and other currencies like the euro and yen. It's a race to the bottom. It's like a whole class's grades dropping—your rank might not fall, but your actual score has been failing for a long time. The evaporating purchasing power? The dollar index cannot tell you that. Your supermarket receipt will. So can this box be checked? Not yet. I can only put a question mark for now. But look: after the nonfarm payroll data surprised, the probability of a September rate hike dropped from 66% to 50-50. The ink on that question mark is gradually fading.
Layer four: Human nature remains the same. Those who cut losses at the bottom will miss all subsequent opportunities. Those who left the market during the $100 price in 1976 were not people who couldn't see gold's future; they were people who couldn't bear the pressure. They were hit by margin calls they couldn't afford, squeezed by family expenses, or lost patience with the losses in their accounts. The godfather's sentence "It doesn't change anything" hides the other half: the condition is that you must have the ability to survive until the day it becomes real. This box doesn't need checking—it automatically holds true in every cycle. After examining all four layers, we have two checks, one question mark, and one eternal truth.
Having come this far, if you think this 51-year-old map is worth watching, please hit like for the Gold Wealth channel. They say that friends who hit like will in the next round buy at the bottom and sell at $35,000. But what I really want to talk about today is the last box on the map: what happened after the $850 price. Have you noticed that almost everyone recounting this history stops at $850, as if the story ended at that most exciting moment? Not at all. January 21, 1980, was both the coronation day of this bull market and its farewell party. The person who ended it was named Paul Volcker, the Fed chairman who had just taken office less than half a year earlier. A man who chain-smoked two-meter-long cigars and was decisive, caring nothing about the Washington government's face. He did not play the "stop the medicine in the ninth month" game; he raised interest rates to 20% in one go, even though the price was pushing the U.S. economy into recession with his own hands. What does 20% mean? Put money in a one-year bank deposit, and you get a guaranteed 20% return. And gold? Hold it for 10 years, and it yields not a single cent of interest. Do you still need to think about this test? Capital voted with its feet, fleeing gold. It began to fall from $850, and it was a long fall lasting 20 years. What was that 20-year period like? Gold, once a star everyone chased, gradually became a leftover nobody wanted to glance at. In the 1980s, the U.S. stock bull market began to run; in the 1990s, tech stocks took over. New fund managers talked about Microsoft and the internet. In their eyes, gold was just a museum exhibit. How severe was the bear market? In 1999, even the Bank of England couldn't take it anymore. It announced it would auction off more than half of its gold reserves. The average price was around $275. In hindsight, that was a perfectly timed sale—right at the multi-decade bottom. This action became a notorious lesson in finance, a textbook example of how even authorities can buy at the top and sell at the bottom. Gold prices in 1999–2000 hit a low of around $250. From $850, that's a 70% drop. And to see the $850 level again, you had to wait until January 2008—a full 28 years. Those who bought at the peak in 1980: if their child was born that year, by the time the price recovered, that child would have graduated from university and started earning a salary.
So this 1975 map never teaches a glamorous lesson like "fall 50%, then buy with eyes closed and wait for 8 times profit." What it teaches is a complete system of cause and effect. The previous gold bull market was born from the inability to control currency and died because a real person was willing to die following along to choke inflation to death. The truly valuable question is: will a Volcker appear again this time? Powell may call himself a hawk—that's not wrong. But compare the numbers, and you'll understand the difference. In 1980, U.S. government debt relative to GDP was only about 30%. Volcker could act boldly because the country's treasury had enough room to gamble. But today, that figure is over 120%. Every step interest rates rise, the Treasury's interest payments swell. This is the other side of the godfather's $160 trillion math problem. The problem may not be whether Powell wants to be Volcker, but that this debt burden leaves no room for him to act like Volcker anymore. Listen to Powell's recent words: the smell is starting to show. Last week, he announced that inflation expectations are easing. Be careful—every word from a central bank governor is carefully screened. His mouth insists that the stance on price stability hasn't changed, but the phrase "inflation expectations are easing" is the door left ajar for a future reversal. Back then, Congress took nine months to lose its courage. This time, the door has been left ajar from the start.
Of course, I must add a sentence: this is a simulation of events, not a guarantee. Suppose the Washington government toughens up and decides to send out a decisive person who doesn't care about anyone. If that happens, the 1980 script will be replayed. The map tells you the path, but it cannot guarantee that there won't be accidents along the way. And what about the godfather himself? How does he follow this map? Two words: his shopping list. In his portfolio, he has a shopping list with clear purchase prices. Recently, he rated 23 mining companies and holds shares in 13. The more gold falls, the happier he is. His words: "To be honest, I'm glad gold is falling. I want to buy more, and I secretly suspect the Fed will help me get my wish." Absorb this attitude: during a department store sale, others fear price drops, but he waits for them. If the price doesn't reach the numbers on his shopping list, no matter how cheap, he doesn't act. But when it does, he closes his eyes and follows through immediately. And don't think the godfather is a stubborn buy-and-holder. When silver prices surged earlier this year, he sold off 80% of his silver holdings for profit. The reason is simple to the point of being boring: "The price reached the target I set initially. The risk-reward ratio changed, so I had to exit." Buying well is a skill, but selling decisively is also a skill. That's what complete discipline looks like.
Finally, he left two self-assessment tests for everyone. Test one: Mental resilience. If your account balance drops by half, can you still sleep? Think of the godfather himself in 1975: full long position, holding from $200 down to $100. He got through it because he passed this mental test. Test two: Financial resilience. Is the money you invested truly "cold money"? Will circumstances force you to cut losses at the bottom? Most of those who cried and left the market at the bottom in 1976 were not people who misjudged the direction; they were pushed out by margin calls or by the need to feed their families. He says bluntly: if you lack either one, this correction could be life-threatening. Oh, and the earlier observation about central banks? The answer is revealed here. Why do central banks dare to accumulate all the way down? Because by nature, they easily pass these two tests. National-level accounts don't get margin calls, and reserve assets have no deadline for cutting losses. What they use is the godfather's strategy in a national team version. The map is fixed, but to walk it to the end, you need these two legs.
Mark Twain once said, "History doesn't repeat itself, but it often rhymes." Today, I want to add a continuation to this old saying: History does rhyme, but your rate of return depends on where you enter the market. Look at these two numbers side by side. Buy at $100 in 1976, wait 3.5 years, and sweep 8 times profit. People would then call you an investment god. But buy at $850 in 1980, and you have to wait 28 years just to break even, and in the middle, you have to watch 20% fixed deposit interest rates beckoning you from across the street. The same map, the same history, but entering just 3.5 years apart—two completely different lives. What's more profound is that both groups probably heard the same story back then: inflation will never reverse, paper money is unreliable, gold is the final answer. Do you see? The narrative didn't change. Only the price changed. Think: even the godfather, who is fully loaded, says this correction could be life-threatening for some people. He doesn't dare decide for anyone. How could I dare?
Your cost, risk tolerance, and investment horizon are not the same as others. Before you hit the buy order, complete the godfather's two self-assessment tests. Only you can write the answer. Next time someone tells you that a 50% drop must be followed by an 8x rise, ask them back: "How are you sure that where we stand now is 100 and not 850?" Oh, before ending, I'll leave you with a little riddle. In today's clip, there is one detail—did you notice? The godfather shouts that he is glad gold is falling and wants to buy more, but on the other hand, he quietly sold 80% of his silver holdings. Both are precious metals, both fell heavily. Why does he keep one as a family treasure and dump the other? Silver this year fell from its high of $121 to around $56—a much steeper drop than gold. The secret behind this is even deeper than gold. Finally, I repeat: all content is merely market observation and information sharing, not investment advice. In the next clip, I will open the godfather's silver account book for everyone to see. Anyone who wants to be the first to see it, don't forget to hit the notification bell. See you in the next clip. Goodbye.