In the past 25 years, gold prices have delivered an annualized return of 12.55%, outperforming the 10.73% return of the Indian stock market benchmark index Sensex. While there is ongoing discussion about whether to invest in stocks or gold given the current market conditions, numerous experts recommend including gold in the portfolio.
Gold prices have been reaching new highs almost daily, with significant gains in recent years. In 2023 and 2024, gold prices saw remarkable increases, with a 13% rise in 2023 and a staggering 27% jump in 2024. The upward trend has continued into 2025, showcasing the enduring appeal of gold.
On Thursday, gold prices hit a fresh all-time high amidst market uncertainties. On the Multi Commodity Exchange (MCX), 24-carat gold April futures climbed by 0.21%, reaching Rs 86,875 per 10 grams.
The spike in gold prices can be attributed to global instability. Concerns over US President Donald Trump’s tariff policies have prompted investors to seek refuge in gold, a traditional safe-haven asset.
International gold prices have surged to $2,945 per ounce as of March 13, reflecting the heightened demand for this precious metal.
CA Nitin Kaushik, in a post on X, wrote: "While many chase stock market returns, gold quietly plays a different game—one that most investors overlook until it’s too late."
In a series of posts, Kaushik noted:
> Gold thrives in chaos – When the 2008 market crashed by 50%, gold soared 30%. The same happened in 2020—markets tumbled, gold rallied. > Rupee down? Gold up! – In 2013, when the rupee fell by 20%, gold holders actually got richer instead of losing wealth. > Real estate vs. gold? – Property may be a great asset, but good luck selling a house during a crisis. Gold? It’s instantly liquid, anywhere in the world. But here’s the real reason gold matters — it’s not just an investment, it’s human psychology at play.
> When panic sets in (and it always does), gold doesn’t just hold value—it appreciates. It’s insurance that actually makes you money. For the last 50 years, every financial crisis has proven this. Not because gold changed, but because human nature hasn’t. > And the best part? You don’t need to store physical gold anymore. Digital gold & ETFs let you invest without the storage hassle. > A smart move? Buy gold before the crisis, not during it. Because buying insurance after the fire has started never works. P.S. – Not financial advice, just something to think about.
Gold vs stock market
According to a recent report by Edelweiss Mutual Fund, the performance of gold prices compared to equities underscores the importance of utilizing rolling returns to evaluate long-term investment opportunities.
While gold may currently be experiencing a strong upward trend, a different perspective emerges when considering rolling return analysis.
5-Year Rolling Returns (Since 1984): Historical data shows that the Sensex has delivered an average return of 14.63%, outperforming gold's 10.28%. In 65% of cases, equities have been the preferred choice for medium-term investors.
10-Year Rolling Returns (Since 1984): The dominance of equities becomes even more evident over longer timeframes. The Sensex has yielded an average return of 13.55%, while gold has lagged behind at 9.85%. Equities have outperformed gold in 64% of instances, reinforcing their potential for long-term growth, as highlighted in the Edelweiss Mutual Fund report.
Sensex-to-Gold Ratio
Investors frequently use the Sensex-to-Gold Ratio to evaluate the relative valuation of gold and equities. A low ratio indicates the potential for equities to outperform, while a high ratio favors gold.
In past observations, when the ratio dips below 1, equities typically perform better over the following three years. On the other hand, when it climbs above 1, gold tends to have the advantage. Currently, the ratio sits at 0.86, below the average of 0.96. This suggests that gold is slightly overvalued compared to equities.
Investors should know
According to the Edelweiss Mutual Fund report, historically, gold prices have acted as a hedge in times of economic uncertainty, while equities have driven wealth creation during periods of growth. The current Sensex-to-Gold Ratio and past trends suggest that equities may outperform gold over the next three years.
The main lesson for investors is the importance of diversification. While equities are crucial for long-term returns, holding some gold exposure can help mitigate risks during volatile market conditions.