Gold vs Nifty in 2025: What 1-year SIP returns in ETFs tell investors — Should you make a switch?

Gold prices surged to record highs on Tuesday, crossing the Rs 1 lakh mark per 10 grams in India amid growing tensions between US President Donald Trump and Federal Reserve Chair Jerome Powell over interest rate cuts.

On the Multi Commodity Exchange (MCX), June gold futures jumped 1.71% to Rs 98,946 per 10 grams, after hitting an intraday high of Rs 99,178. Including GST, the price of gold has now breached Rs 1,00,000, setting a historic benchmark in domestic markets.

Globally, COMEX June gold contracts also touched fresh lifetime highs. Prices hit $3,500.8 per ounce, after climbing past earlier highs of $3,495.5 and $3,485.9 per ounce.

The rally in gold comes despite traditional safe-haven demand for the US dollar weakening. Analysts attribute the spike to investor flight to gold amid rising uncertainty around US monetary policy and intensifying political pressure on the Fed to slash interest rates.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said: "Gold prices traded with high volatility after a major gap-up opening above Rs 99,000 on MCX, oscillating in a broad range between Rs 99,000 and Rs 98,150 through the session. The rally continues to be fueled by the Federal Reserve’s reluctance to cut interest rates immediately, despite growing pressure from former President Trump, who has been vocal about urging rate cuts. This divergence has further enhanced gold’s appeal as a safe haven, pushing prices to fresh lifetime highs in both Comex and MCX. The ongoing uncertainty around monetary policy direction, inflation risks, and geopolitical trade concerns is keeping sentiment buoyant for gold. However, with prices at record levels, intraday volatility is likely to persist."

Gold ETFs vs Nifty ETFs

Over the past year, gold has outshone equities in SIP performance.  Gold ETFs have outperformed Nifty 50 ETFs over the past year due to global uncertainty and inflation, but Nifty 50 ETFs remain essential for long-term equity exposure. Smart portfolios often include both — for growth and stability.

Over the past year, Gold ETFs have significantly outperformed Nifty 50 ETFs, drawing investor attention toward the yellow metal as a hedge against uncertainty. While equity markets remained volatile amid global macroeconomic concerns, geopolitical tensions, and fluctuating interest rate expectations, gold emerged as a safe haven asset. Most gold ETFs delivered returns between 45% and 55%, compared to a modest 2–3% from Nifty 50 ETFs.

This divergence in performance highlights gold’s role during periods of economic stress. Central bank buying, inflationary pressures, and a weakening dollar further supported gold prices, pushing them to record highs globally and in India. Meanwhile, the equity markets faced headwinds due to concerns over earnings growth, global liquidity tightening, and risk aversion.

A monthly SIP of Rs 10,000 in SBI Mutual Fund’s Gold ETF delivered a stellar XIRR of 54.35%, compared to a modest 2.93% XIRR from the SBI Nifty 50 ETF. This stark contrast highlights gold’s strength as a defensive asset amid economic uncertainties.

The trend was consistent across other Nifty 50-linked ETFs, where returns remained muted. Quantum Nifty 50 ETF FoF recorded the best performance among them at 3.03%, followed by LIC MF Nifty 50 ETF at 3.01%. Invesco India Nifty 50 ETF posted the lowest return in the segment at 2.87%.

On the other hand, gold ETFs saw consistently strong gains. Axis Gold ETF led with a 54.85% XIRR, followed by ICICI Prudential Gold ETF at 54.62%, while Nippon India ETF Gold BeES reported 48.32%.

Gold ETF vs Nifty 50 ETF

Feature	Gold ETF	Nifty 50 ETF
Underlying Asset	Physical gold (usually 99.5% purity or above)	Equity shares of the Nifty 50 companies
Objective	Track the domestic price of gold	Replicate the performance of the Nifty 50 index
Returns (1-Year)	~45–55% (varies by fund)	~2–3% (in recent 1-year performance)
Volatility	Low to moderate	Moderate to high (market-dependent)
Risk Type	Inflation hedge, safe-haven asset	Market risk, economic and sector-driven
Ideal For	Diversification, capital preservation during uncertainty	Long-term equity growth and capital appreciation
Liquidity	High (traded on stock exchanges)	High (traded on stock exchanges)
Taxation	LTCG after 3 years at 20% with indexation	LTCG after 1 year at 10% (above Rs 1 lakh gains)
Tracking Error	Generally low	Varies depending on fund efficiency

The surge in gold prices has been driven by multiple macroeconomic factors including central bank gold buying, fluctuations in the dollar index, and inflationary concerns. According to Tata Mutual Fund, the ongoing demand surge and global uncertainty have positioned gold as a preferred investment, with expectations of sustained inflows and price resilience.

However, March saw net outflows of Rs 77.21 crore from gold ETFs, a reversal from Rs 1,979.84 crore inflows in February, attributed to profit-booking. Despite this, average assets under management (AAUM) for gold ETFs rose 3.82% month-on-month to Rs 57,101.29 crore, underlining continued investor interest.

“This sharp rise reflects a growing investor preference for safe-haven assets amid global economic uncertainty, rising geopolitical tensions, and persistent inflationary pressures. Additionally, the sustained rally in international gold prices and the weakening of major global currencies against the US dollar further enhanced the appeal of gold as a strategic portfolio diversifier during the year,” said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.

Ajay Garg, CEO of SMC Global Securities, noted a reversal in March, where gold ETFs experienced net outflows of Rs 77.21 crore from Rs 1,979.84 crore in February, primarily due to profit-booking, despite a 3.82% growth in AAUM to Rs 57,101.29 crore. 

Surge in gold prices

Gold’s appeal as a hedge against volatility has grown, especially as global markets remain uneasy. On paper, the numbers look compelling. This surge in gold prices, up over 25% in six weeks, suggests potential short-term corrections, yet the long-term outlook remains positive. 

However, experts caution against shifting entirely from equity to gold. While gold ETFs offer excellent portfolio diversification and act as a volatility cushion, they are not substitutes for long-term equity investments. Nifty 50 ETFs, despite short-term underperformance, continue to offer wealth-building potential through exposure to India’s top-performing blue-chip companies.

In essence, the current outperformance of gold ETFs should be seen as a reminder of the importance of asset allocation, not a reason to abandon equities altogether. Balanced portfolios benefit from the strengths of both asset classes.

Industry experts, including those from Motilal Oswal Wealth Management, anticipate volatility but recommend strategic buying during dips. Their forecast places gold prices between $3,350–3,500, with a domestic range of Rs 96,500–1,00,000, potentially peaking at Rs 1,06,000. This strategy aligns with broader market sentiment that sees gold as a stable investment amidst economic fluctuations.

Tata Mutual Fund further supports the notion that medium-term gold prices will remain firm due to continued central bank buying, expected monetary policy adjustments, and geopolitical factors. Such conditions have prompted leading financial institutions to adjust their projections, underscoring gold's resilience and potential as a safe haven asset. As the market continues to navigate through economic uncertainties and inflationary pressures, gold's role in investment portfolios is likely to remain pivotal.

Investing in gold 

With gold delivering a solid 18% CAGR over the past three years, many investors are now asking the big question: Should they reduce equity SIPs and allocate more to gold? The yellow metal has outperformed many traditional investments recently, powered by geopolitical risks, central bank accumulation, and persistent inflation.

“Gold has seen a sharp rise in recent years, delivering a CAGR of 18% over the past three years. This surge is largely attributed to increased global uncertainty, geopolitical tensions, inflationary pressures, and central bank buying. While gold has performed well recently, it's important to recognize that its returns have historically been inconsistent,” said Chethan Shenoy, Executive Director & Head - Product & Research at Anand Rathi Wealth Limited.

He added, “Gold often shines during times of uncertainty, acting as a hedge, but may underperform during stable or bullish equity market phases. Therefore, understanding the risk-adjusted return and long-term role of gold in a portfolio is crucial.”

"When markets are uncertain, gold acts as a hedge but data shows that when markets fall by 10%, gold typically delivers just 3–4%. By using debt instead, investors can earn around 7% during such periods. Given this, it's wise to diversify beyond gold to reduce risk and enhance returns. For 2025, a balanced portfolio with 80% equity and 20% debt is recommended, as these assets often move in opposite directions, helping stabilize your portfolio. Historically, this mix has delivered returns of around 12%. If you still want exposure to gold, limit it to not more than 10% of your portfolio, and opt for Gold ETFs for cost efficiency and liquidity," Shenoy further added.