In the realm of investments, two distinct asset classes have long been in competition for investor attention and capital: gold and equity. Whether it’s the allure of stability in uncertain times or the potential for growth in booming markets, the comparison between these two has been a perennial topic of discussion. As the Sensex, India’s benchmark equity index, inches closer to the significant milestone of 75,000, both gold and equities find themselves in a neck-and-neck race, each striving to claim the spotlight.
Presently, gold, renowned for its status as a safe haven asset, commands a price above Rs 72,500 per 10 grams, while the BSE Sensex continues its ascent, consistently reaching new peaks and hovering on the brink of breaching the 75,000 level. Despite this apparent rivalry, recent trends illustrate that both gold and equity have delivered impressive returns across various time horizons, ranging from one year to two decades.
The Journey of Gold Over Decades
The trajectory of gold prices in India over the years reflects a notable upward trend. Beginning at Rs 63.25 per 10 grams in 1964, the precious metal surged to Rs 1,330 by 1980. Subsequently, from 1981 to 2000, gold prices experienced a moderate yet steady climb, escalating from Rs 1,670 in 1981 to Rs 4,400 by 2000. This period highlighted the inherent volatility of gold prices and their correlation with global economic shifts.
However, the onset of the new millennium witnessed a substantial surge in gold prices, particularly during significant economic upheavals such as the global financial crisis of 2008 and the COVID-19 pandemic in 2020. By 2020, the price of gold per 10 grams soared to over Rs 48,500, reaffirming its status as a safe haven during times of economic uncertainty. Notably, gold delivered returns exceeding 1000% to investors over the 20-year period from 2000 to 2020. Even in the post-COVID era, gold prices continued their upward trajectory, surpassing Rs 65,500 in 2023, fueled by geopolitical tensions and market instability.
As of 2024, gold prices surged past the Rs 72,800 per 10 grams mark, albeit trading slightly lower at Rs 71,280 per 10 grams in the national capital on Monday, April 8, 2024. Analyzing returns over various periods, gold witnessed a remarkable surge of nearly 1,150% over the last two decades, with gains of 161% and 123% in the last 10 and 5 years, respectively. Over the past year alone, the precious metal delivered a return of 17.44%.
Commenting on the recent surge in gold prices, Tapan Patel, Fund Manager-Commodities at Tata Asset Management, attributed the phenomenon to a combination of factors including a weak macro-economic environment, geopolitical risks, and increased central bank gold buying. Patel noted a surge in investment demand for gold in India across various investment instruments, underlining the enduring appeal of the precious metal amidst market uncertainties.
