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Gold vs. Equity Market in the last 3 years

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Gold vs. Equity Market

Shine of Gold is getting brighter with every passing day. In a recent study conducted by Assocham it was found that the yellow metal has surpassed equity market in terms of profit, which has given negative returns on investment in the last three years. Gold on the other has continued to increase in its value continuously giving the investors much more wealth then what is actually invested.

People who invested in gold have seen their money grow more than double. Thanks to the rising demand of the yellow metal which is increasingly becoming the first choice for investors not only in India but all round the globe. On the other hand, investors in the equity market have seen their wealth erode. The erosion has been seen more for the retail investors, who generally invest in the small mid-cap stocks. Property which is generally out of reach for the small investors too has seen good returns but not as much as gold, which has outshone all other investment avenues when the global economy has been through tumultuous times.

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Gold is currently priced well above Rs. 32,000 per ten grams giving more than double the returns on investment in three to five years span. Equity market has underperformed as per the investors and analyst expectation. Investments in equity have not even given a simple bank interest rate equivalent and are negative in actual yield. Be it the local investor or global investors, they have all gone by the conventional wisdom of gold being the safest bet when there is uncertainty about all other investment avenues. Thus, it would be wrong to blame Indian passions for gold, as if it is only this passion which led to a big yellow metal import of $60 billion in fiscal 2011-12. There were global risk aversion factors at play.

Read more about Gold – Uses and Interesting Facts.


If we talk about the five year span for the gold investment, we see it has outcast every sort of investment for the horizon by giving more handsome results to the investors than expected ever. The precious metal was selling around Rs.9,500 per ten grams five years ago in September, 2007 thus giving a whooping return of over 350 percent in the time horizon of five years. Gold prices have seen a sharp rise even in the London Metal Exchange (LME), previously being traded in the range of $900-1000 per ounce in 2009, and has now reached the mark of $1700 per ounce, which is almost double in the international market too.

If we talk about the real estate prices we find that the rising property prices have given the investors an average yield of 40-50 per cent on all-India basis. It is not wrong to say that the property prices in cities like Delhi, Mumbai, Chennai, Gurgaon have doubled in the past three years, but such cases of doubling has been very far and few. In cities like Hyderabad, the demand is very low and the prices are at such poor levels that the investors have not got the yield at simple interest rates in property.


Thus to conclude we can say that the yellow metal has absolutely outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays. The price of the precious metal is likely to fall, only if the prevailing USD rate gets a correction, making rupee stronger and helping economy to get a sustainable rate of GDP growth in near future. It is expected that the several reforms which are being implemented in the economy recently, might give a boost to the development thus helping gold get a minor correction sometime around later half of 2013.



Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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