Gold is outperforming Nifty

The equity markets have been flat recently, and gold has seen an up move. There are a bunch of conversations and articles around this now. Here is a comparison of Gold & Nifty since last year.

Aren’t equities better in the longer period?

Let’s look at the numbers from Jan 2000 onwards.

If you invested Rs. 100 in Nifty in Jan 2000, you would have Rs. 1173 at the end of 2022. For the same period, if you bought gold, your Rs. 100 investment would be worth Rs. 1213.

But you also get dividends with stocks. Will gold still be a better investment?

Fair, let’s assume you receive an average dividend of 1% p.a. If you invest in gold using Sovereign Gold Bonds (SGBs), the RBI pays you an interest of 2.5% p.a. on your investment. This is on top of the market returns on gold.

If you invest in equities through a mutual fund or a portfolio manager, you will also be charged a management fee. Suppose your mutual fund paid a return similar to Nifty. After a 1% p.a. expense ratio, today’s value of your Rs.100 investment made in Jan 2000 reduces from Rs. 1213 to Rs. 960.

Here is a comparison of Gold & Nifty since Jan 2000.

Nifty vs Gold - 2000 Onwards

Gold is outperforming Nifty now and has done better in the last 23 years as well. Why should I invest in stocks at all?

The narrative seems to greatly favour gold if you look at the last year and the data since Jan 2000. However, equities were relatively expensive before the markets crashed in 2001. Picking a slightly different starting point can poke holes in the “gold is always better” narrative.

Here is Nifty & Gold since 2003. :slightly_smiling_face:

Nifty vs Gold - 2003 Onwards

And here are a bunch of different starting points put together.

Gold has definitely done well if equities are overpriced at the period’s starting point. However, Nifty comes up on top if you pick a period where the markets have been muted for some time (see periods starting 2003 & 2013 above). Equities and Gold might be best when both are used in a portfolio together.

Regarding gold, Sovereign Gold Bonds from the RBI might be the best way to buy some.


Is it because of INR depreciation. Gold is always priced in USD. I had in the past seen a video by Feroz Aziz of Anand Rathi, he had explained then that investing in Gold is a good hedge against USD for resident indians who have kids going overseas to study.

He also said that there are times when Gold will peak and most of the retail investors will miss it and then the gold price will languish over years.

I was able to find an old video, have a look. Time stamp 3.23 onwards

Yep. You often get to see Nifty returns computed in INR and compared with Gold returns in USD. It is not a fair comparison. The above data & charts consider gold appreciation in INR.

From Jan 2000 to Dec 2022, INR has depreciated by about 90% against the USD.

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This is very good advice. esp those who are looking for reducing short term volatility of portfolio but want to stay invested for long duration.
One way to achieve it pre-determine %allocation of equity and gold. Periodically (quarterly or yearly) reset to pre-determined % allocation ie sell which has grown beyond pre-determined allocation and invest the amount in other to reset % allocation.
This is one one of the simplest rule based buy low, sell high strategy which takes advantage of short term non-correlation/low correlation in gold and stock market

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I too believe gold is a sound but under-estimated asset. Here is a plot where I got convinced on how good the gold is from an investment perspective.

Here I plotted the equation (GOLD*USDINR)/NIFTY in TradingView

The plot basically shows how gold (in INR) performed in comparison to Nifty. When the plot goes up, it means gold outperformed Nifty. When it goes down, it means the gold underperformed.

When viewed from far, it appears both performed quite similarly in the long term as the plot is going sideways, and not an upward (gold performed better) or downward (nifty performed better) trend.

Happy investing