Gold rate today is $4,123, and the gold price today in India is Rs 1,26,090. At the start of the year, gold in USD was trading around $2,600 and just under Rs 80,000 in the Indian markets.
Gold’s performance in 2025 has sparked a debate among investors. Is investing in gold a better option than equities? To me, the question itself is wrongly put. We will see it later as to why.
First, let’s look at why investors are comparing gold returns to those of equities. Here, we compare Sensex returns in INR to gold returns in USD, both on a compound annualized growth rate (CAGR) basis. Historically, INR has depreciated around 3% annually against USD.
Gold’s Golden Performance
So far in 2025, gold has beaten leading equity indices hands down. As against, Sensex and Nifty, which managed 8% and 9.5% respectively, gold is up over 58% so far this year.
The gains are not sudden. For the calendar year 2024, gold generated 27%; the year before that, gold gained 13%.
But, you would say, that’s too much of a myopic view. Agreed. So, let us compare the medium to long-term returns of gold and equities.
First, let us look at 1, 3, and 5-year returns. It is the recent performance of gold that has made investors sit back and take notice.
Over the last 1 year, gold has been up a staggering 61%, while the Sensex is up by merely 9%. If we extend a bit, over the last 3 years, gold generated 32%, while the Sensex managed 11%.
The story repeats itself when 4 and 5-year returns are compared. Over the last 4 years, gold generated 23%, while the Sensex gave 9%. Over the last 5 years, gold generated 16%, while the Sensex gave 14%.
The returns comparison shows gold taking away all the laurels over the last 5 years.
Now, let us see a comparison over a longer period.
Over the last 25 years, the CAGR of gold has been 11.5%. Sensex, during the same period, has given a CAGR of 13%. That’s a difference of 1.5%, which over a longer period translates into a sizeable sum in currency terms.
Over the last 20 years, gold generated 11%, while the Sensex gave 12%. Over the last 15 years, gold generated 7.7%, while the Sensex gave 10%. Over the last 10 years, gold generated 12.7%, while the Sensex also gave 12.7%.
It clearly shows, returns generated by both gold and equity have been in a close range and competitive over 10,15,20, and 25 years. Note that this is a point-to-point performance and not rolling returns, which could have given a much better comparison.
However, here’s a caution for gold investors. Gold has also shown long periods of stagnation and even remained underwater for longer periods. In November 1980, gold was at $600, remained below that price for a long time, and regained the $600 level only in March 2006, over 25 years of negative returns.
Is Gold a better Investment Option
Now, let us see if gold as an investment option should be preferred over equities, given the comparable and even better returns that it has generated than the riskier asset.
As history shows, gold as an asset class works better during uncertain times. The recent strong performance of gold is largely on the back of ongoing economic and geopolitical risks. Central banks have been showing increasing interest in the purchase of gold over the last 3 years, driving prices higher.
In a nutshell, over the short to medium term, gold returns have far exceeded equity market returns, while over longer periods, its performance has been comparable to equity market. As most financial planners suggest, an exposure of 10 to 15% of one’s investment portfolio is ideal for retail investors. And, when it comes to owning gold, rather than buying physical gold, investing in gold ETFs proves it be a less costly way.