Author: Aditya Rathi & Shail Pillay
Should I Invest in Gold? Is Gold a Good Investment? Gold Vs Equity?
If you are also having any of these questions, this article will definitely clear your doubts.
To begin with, investing in gold has provided superior returns compared to equities.
In Turbulent Times, Gold has Outstandingly Outperformed Nifty
- Gold and equities form a complementary asset duo, essential for a strategic well-diversified long-term portfolio. Historically, they share an inverse relationship—when stocks decline, gold often thrives.
- Globally, as gold demand spikes when GDP growth slows. In financial crises, equities fall out of favor, while gold, a traditional safe-haven asset, provides stability. This makes it an ideal time to invest in Gold.
Why should I invest in Gold now?
- Central banks are increasing gold reserves to hedge against fiat currency risks, reinforcing gold’s role as a superior store of value.
- Additionally, we are witnessing a unidirectional equity market, making gold a compelling diversification tool. Both these reasons translate into strong returns, making today an opportune time to invest in gold.
Let’s look at how Gold has fared during periods of uncertainty
1. Global Financial Crisis (2008)
Gold’s surge during the 2008 financial crisis highlights its role as a dependable asset that provides stability and safeguards wealth during economic turmoil.
2. Market Volatility (2010-11)
Global market turbulence—triggered by the European debt crisis and U.S. credit concerns—left equities volatile. Between Jan 2010 and Dec 2011, Nifty declined 12%, while gold soared 63%, underscoring its resilience.
3. 2014 General Elections and Euphoric Market Sentiment
Pre-election uncertainty (Jan-May 2014)
While investors anticipated a change in leadership, there was skepticism about the economic direction under a new government. Nifty saw a modest 5% gain, while gold outperformed with 11% returns.Post-election rally (May-Dec 2014)
As investor confidence surged with the appointment of Prime Minister Narendra Modi in May 2014, Nifty rose 24%, while gold dipped 12%.4. Covid-19 Pandemic
Jan-Apr 2020: Nifty plummeted 38%, while gold surged 14% as investors sought safety
The COVID-19 pandemic brought unprecedented challenges to the global economy. As the virus spread, markets reacted to the uncertainty with steep declines, providing an opportune time to invest in gold.
Sep 2020-Mar 2021: As markets recovered, Nifty rebounded 30%, while gold corrected by 13%
However, as markets began to recover and adjust to the new normal after September 2020, investors shifted funds back to equities
Conclusion: Gold vs. Stock Market: Long-Term Trends
From May 2007 to July 2024, gold has consistently outperformed equities during economic downturns while keeping pace with Nifty in the long run.
As we step into 2025, gold remains an attractive investment. Frothy equity valuations, geopolitical tensions, and economic uncertainties—amplified by inflation and currency volatility—position gold as a critical hedge against market instability.
For investors looking to diversify their portfolios and safeguard their wealth, now is the perfect time to invest in gold.
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