Gold Vs Equity: Evaluating These Asset Classes By Performance Over A Year

Investors pick asset classes they invest in based on the returns and the risk they are willing to take for these returns. Among the asset classes, gold has always held its place through generations of Indians.

As geopolitical tensions and uncertainty in various global situations arise, gold has been considered a safe haven investment. Ahead of major events like US Fed rate cuts or approaching conflict, the global demand for gold increases and drives the prices higher.

While the larger international cues have determined the trajectory of global demand and prices, these movements in price and demand have also been reflected in the domestic market.

The domestic gold prices have been on a steady rise ahead of festivities. The Budget earlier this year significantly reduced the customs duty for gold from 15% to 6%. This drove further demand and upside in the long term, despite the price drop. The prices of the commodity dropped to Rs 67,800 per 10 gram, according to the India Bullion Association.

The prices have been on a paced increase as the commodity recorded highs going up to Rs 80,000 this month. Investors perceive the value of the gold as more stable than equities, as evidenced by the returns.

Nifty 50 has risen from 99 points in November 2023 compared with 124 points as of Oct. 31, 2024. In comparison, gold price surged 100 points in November 2023 to 143 points on Oct. 31, 2024.

During the period, Nifty hit a high of 134 and a low of 112, while gold touched a high of 143 and a low of 119.

When evaluated over a one year period, both the asset classes have seen highs and lows, with gold beating the Nifty 50 by 20 odd points.

The commodity only saw a slip in prices during February and July this year. With a fast increase in price, the yellow metal's current demand stands at exuberant prices during the Diwali season this year. The broader market reported their lowest low of the year in June and the highest high in September this year. The Nifty has been experiencing a certain level of correction following the highs, while gold has continued its rally.

With very little apprehension attached to the asset class, people have held this asset for longer time periods when compared to equity. When it comes to equities, there is a greater fear of loss, whereas gold is considered a safe-haven asset.