The historical lessons from the three surges of precious metals after World War II: understanding the first two is essential to grasp the present

Since the disintegration of the Bretton Woods system, gold and silver have experienced three remarkable supercycles. These three waves not only shaped the risk landscape of modern financial markets but also repeatedly confirmed a brutal rule: after extreme rises, extreme declines are almost inevitable. During the transition of the post-World War II financial order, precious metals served as safe-haven assets during credit crises, with their price fluctuations often hiding deep changes in the global macro environment.

The First Surge After the Collapse of the Bretton Woods System (Late 1970s - Early 1980s)

In 1944, as World War II was nearing its end, the Bretton Woods system led by the United States laid the foundation for the post-war economy. However, by the 1970s, this dollar-based credit system finally reached its end.

In 1971, the U.S. announced the suspension of the dollar’s convertibility into gold, officially ending the gold standard. Freed from fixed prices, gold suddenly gained the ability to price itself freely. Meanwhile, two oil crises erupted in the 1970s, causing global energy prices to soar and inflation to reach unimaginable heights. The dollar’s credibility was severely shaken, and fears of losing purchasing power overwhelmed all rational considerations.

Against this macro backdrop, gold skyrocketed from around $200 in 1979 to $850 in early 1980. In just a few months, the increase exceeded fourfold. This was a classic macro-control failure bull market—the economic system itself was malfunctioning, and asset prices entered a frenzy.

Silver’s performance was even more exaggerated. From single digits to over $50, its rally far outstripped gold, with volatility reaching astonishing levels. Speculators flooded in, rapidly piling up positions in a short period.

But this prosperity did not last long. The climax ended dramatically: gold experienced a deep retracement, nearly halving in value. Even more brutal was silver’s fall—from around $50 back down to teens, with a maximum decline of nearly 80%, akin to a free fall.

In the following two decades, gold remained suppressed in a prolonged sideways range. The market drained hot money and investor enthusiasm over time. This period is known as the “Lost Two Decades,” where investor passion for precious metals plummeted from fever pitch to freezing point.

The Second Wave in the Era of Liquidity Flood (2010-2011)

In 2008, the world experienced the most severe financial crisis since World War II. To rescue the economy, central banks worldwide adopted extreme measures: zero interest rate policies and massive quantitative easing. Funding costs approached zero, and markets were flooded with liquidity.

In this environment, confidence in the fiat currency system wavered again. Fears about future stability drove large amounts of capital into precious metals. Gold climbed from around $1,000 to $1921 in September 2011, completing a nearly doubling rally.

Silver again played the role of the “more explosive barrel,” reaching close to $50. The familiar script played out once more, but this time the ending was slightly different.

This correction did not explode in a sudden crash like 1980 but was a more prolonged slaughter. Gold retraced over 40% from its high, briefly falling back to around $1,100. Silver slid gradually from nearly $50 down to the $10-20 range, with a decline approaching 70%.

Subsequently, the market entered years of sideways decline. Prices were repeatedly manipulated, the trend disappeared entirely, and enthusiasm cooled off completely. Investors had to accept a fact: when an asset shifts from a trend to emotion, and then from emotion to price correction, the process often takes years.

The Current Third Cycle and the Common Traps of the Previous Two

Today, the market is experiencing the third extreme cycle of precious metals since WWII. What makes this cycle different is that its narrative appears more rational and sustainable than the previous two.

The core story for gold is: persistent central bank reserve accumulation, diversification strategies among countries, and long-term geopolitical risks. These are tangible long-term drivers.

For silver, the addition of industrial demand’s hard logic is significant. Photovoltaic industries, the new energy revolution, and global electrification are repositioning silver from a “pure speculation” asset to a “strategic metal with actual consumption scenarios.” It sounds more like a sustainable long-term trend rather than a fleeting bubble.

This is precisely where the danger lies.

The most skillful trick in history is to package the same violent volatility with more sophisticated reasons. The commonality in the previous two cycles is not in their stories but in the characteristic structure during rapid price increases: steep gains, market sentiment aligned, and extremely crowded positions. Such a structure can only be resolved through a sharp correction to de-leverage and reset the market.

Repetition of Historical Laws: Big Rises Are Followed by Big Falls

The correction amplitude of precious metals follows its own规律. Gold typically retraces more than 30% to be considered a normal correction. Silver, with even thinner liquidity and more concentrated speculation, often sees retracements over 50%, which is closer to the norm.

Looking back at post-WWII history, this规律 is as precise as a clock. The first from the extreme 1980 peak to a 20-year low, the second from the 2011 high into a long correction. How the third will unfold is unpredictable, but the first two have clearly etched this规律 into history.

The simple rule is: when you see the words “super surge,” the likely follow-up is “super retracement.” The only difference is how it happens—whether a quick, painful crash or a prolonged, torturous decline.

The more violent the rise, the greater the adjustment usually to come. This规律 has appeared so consistently in human financial history that investors are reluctant to admit they might fall into the same trap again. But the three cycles since WWII have repeatedly validated with data and time:规律 never fails simply because the narrative becomes more reasonable.