Top 50            Stocks to Buy


Why Gold returns are better than equities?

gold returns better than equities

In the year gone by (i.e., ended 31 March 2024), Indian equities were able to deliver strong returns to investors. Going by the data, by the end of last trade session Thursday, Nifty 50 index saw ~30% rise and BSE Sensex went up by ~27% this time. However, there are investors who still believe that gold returns are better than equities. Let us explore whether they are right in thinking this!

Even the banking stocks continued their rally in FY24 (ended 31 March 2024). Bank Nifty index saw an increase of ~18% in FY24. With this, all 3 frontline indices of Indian stock market saw a strong growth in FY24. 

Equities return v/s gold return: A comparison

Investors and readers who believe that gold returns are better than equities are required to read this to have some clarity on the factors impacting both the asset classes. Broadly, small-cap index saw an increase of ~62% while mid-cap index went up by ~65% in FY24. In comparison to MCX gold rate in FY24, gold prices saw an increase of only ~13.50%. 

Therefore, it is not clear that Indian equities were able to beat the returns delivered by gold in FY24. Now, what do you think? It will also come as surprise that the factors which impact the equity markets are the same ones impacting gold. Some of the leading factors include the US Fed rate, economic data, inflation data, global trade data, etc.

While some amount of gold needs to be there in investment portfolio, we believe that it is very difficult to beat the returns given by the equities. 

Why gold underperformed equities in FY24?

As per the experts, increase in gold prices was limited by retail market due to the fact that retail bullion market tends to adjust itself with future market movements when there is a significant increase in gold prices. 

As and when witnesses sell-off, its prices drop. On the other hand, in FY24, the investors started to shift their money from gold to equities after stocks continued their rally. As the capital shifted to equity assets, markets continued to increase and make record highs. 

Let us know how the mechanism works. Gold future prices are associated with retail bullion market premium. More often than not, the retail gold prices tend to be available at ₹1500 – ₹1800 premium per 10 gram in comparison to MCX gold rates. 

Now, when there is a significant rally in MCX gold rate, retail market tries to adjust with strong increase through decreasing the premium in retail market against income they get on physical buffer stock. As retail gold investors invest their money in future gold, they tend to transfer their money from gold to equities once future gold prices see significant rise. 

This is the main reason why, despite same directional movement and similar factors impacting both equity and bullion assets, stock market returns outperformed gold returns in FY24. Apart from the global factors, there certain domestic factors too which helped the equity markets in FY24. 

These factors include economic growth prospects, increased capex from government, GDP growth, resilient corporate earnings, etc. 

Gold returns are better than equities only when there worries related to the economic slowdown or there are recessionary fears as this yellow metal acts as the best hedge against unfavourable economic environment. In the long run, equities have the ability deliver phenomenal returns, if invested at the right time. 

Should you invest in gold or equities now?

With gold prices nearing record high, investors are right in a fix that whether or not they should invest in gold. Increase in gold prices was a result of the US Fed hinting a rate cut anytime soon. Yellow metal has been fond asset class for central banks and safe-haven investing community. 

Expectations of volatility in economic environment tend to make financial instruments less attractive for the investors in comparison to gold. This leads to higher purchases of yellow metal and increased prices. Rising geopolitical risks and purchases by central banks, led by China, are some additional factors fuelling gold prices. 

While predicting the gold prices are always uncertain, gold has always been considered as a safe haven by the investors. Apart from this, there is no end in sight to Russia-Ukraine war and Israel-Hamas conflict has also been spread to Red Sea region. These factors might also help gold prices in the upcoming months. 

On the other hand, Indian equity markets are expected to surge to fresh record higher by the end of June 2024, despite experts believing lofty valuations. However, leading brokerages believe that a major correction over upcoming 3 months is unlikely. 

Optimism in Indian equities should also be supported by expectations that ruling Bharatiya Janata Party (BLP), led by PM Shri. Narendra Modi will continue to remain in power in upcoming national elections. Expectations about rate cuts should result in increased foreign inflows in domestic equities, further improving the growth prospects.  

Therefore, before jumping to the conclusion that gold returns are better than equities, it is of utmost importance to factor in the domestic and global economic environment, GDP forecasts, rate cuts data, and other macro data points.  

CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as,, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

Leave a Reply

Your email address will not be published. Required fields are marked *