How Much Return Gold Has Given Compared To Equity Since India's Independence?

Gold prices were driven to historic highs by the enduring tensions in the Middle East and the expectation of potential interest rate cuts in the United States. Gold has always been seen as the safest investment option during times of turmoil, evidenced by the current spike in gold prices, which have been close to record highs despite global unrest and unstable economies. Because of the metal's attraction and falling US Treasury rates, gold prices were stable around July's all-time high. Notwithstanding recent volatility, the overall trend for gold remains favourable for investors despite the continuous uncertainty around the scope and frequency of rate reductions this year.

India's economy has grown significantly since gaining independence in 1947, which has affected a number of investment options, especially those involving gold and equities. Since 1947, the price of gold has climbed dramatically in India. In 1947, the cost of ten grams of gold was around Rs 88. By 2024, it rose to nearly Rs 75,000. This suggests that the long-term compound annual growth rate (CAGR) will be roughly 9 per cent. In contrast to the stock market, the Sensex, which began trading in 1979 at 100 points, has increased to nearly 82000 points by 2024. Over time, this growth equates to a CAGR of almost 16%.

As a hedge against inflation and currency devaluation, gold has historically been a very safe investment over the long run. However, when considering the return on investment that gold has provided relative to equities since India's independence, let's observe from a variety of industry professionals.

View from - Palka Arora Chopra, Director, Master Capital Services Ltd

Since its independence in 1947, India has seen substantial economic development, influencing various investment opportunities, particularly in gold and equity. Gold has long been considered a symbol of prosperity and stability in India. The price of gold per 10 grams has steadily increased throughout the decades, from Rs. 540 in 1975 to Rs. 69,270 in 2024. This demand is driven by gold's cultural significance and security in the face of economic uncertainty, making it a popular investment, particularly during times of crisis such as the 2008 financial collapse and the COVID-19 epidemic.

Despite their inherent volatility, equity investments that provide a share in the country's economic progress have generated significant long-term profits. The Indian equities market was in its early stages from the 1950s to the 1970s, with poor liquidity and limited investor interest. However, the 1980s were an era of development, with the establishment of financial institutions and regulatory agencies. The economic liberalization of the early 1990s was a turning point for the equities market, bringing in reforms, foreign investment, and technical developments that drove rapid expansion. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have developed as major trading platforms.

Taking into account the Sensex's base value of 100 in April 1979, the Dalal Street barometer has increased 800 times at a compound annual growth rate (CAGR) of 15.9% over the course of 45 years.

Investors choosing gold should remember that, if they hold their investment for nine or ten years, precious metals yield an annual return of at least nine to ten per cent. Long-term gold investors should purchase the metal at any price without considering its outlook, as it will ultimately yield a 9-10% annual return.

In conclusion, both gold and equity have distinct advantages. Gold provides stability and serves as an inflation hedge, whereas equities yield larger returns due to economic expansion. Investors should take a balanced approach, embracing both asset classes to benefit from the stability of gold and growth from equity.

View From Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL)

Over the long term, gold has been a relatively stable investment, often seen as a hedge against inflation and currency devaluation. Gold prices in India have increased significantly since 1947. The price of 10 grams of gold was around ₹88 in 1947 and has risen to over ₹75,000 in 2024. This indicates a compounded annual growth rate (CAGR) of approximately 9% over the long term.

The Indian Equity market, represented by indices like the Sensex and Nifty 50, has provided substantial returns over the long term, reflecting the growth of the Indian economy. The Sensex, which was launched in 1979 with a base value of 100, has grown to over 82000 points in 2024. This growth translates to a CAGR of around 16% over the long term.

Gold is considered a safer and less volatile investment compared to equities. Equities, while potentially offering higher returns, come with higher risk and market volatility. Both asset classes have their advantages and roles in a diversified investment portfolio. Gold acts as a hedge and safe haven, while equities offer growth potential.

Should You Invest In Gold Amid Ongoing Geopolitical Instability?

Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited(RSBL) said, when global tensions rise, gold often emerges as a preferred investment due to its reputation as a stable and reliable asset during times of uncertainty. This is evident in the recent surge in gold prices, which have hovered near record highs as investors seek refuge from the volatility associated with geopolitical conflicts and economic instability. The ongoing tensions in the Middle East and the anticipation of possible U.S. interest rate cuts fueled further demand for gold, pushing its prices close to historical peaks. Spot gold increased slightly, reflecting the cautious optimism among investors who are closely monitoring global events and economic indicators. Gold's appeal in such times is rooted in its intrinsic value and historical role as a hedge against both inflation and currency devaluation. In this environment, gold's role as a secure store of value is reinforced, solidifying its position as a critical component of a diversified investment portfolio, especially during times of heightened global tension.