Gold is the flavour of the season as most households across India begin their Diwali shopping. With the prices of the yellow metal breaching $4,000/oz in international markets and the gold rate today well over the Rs 1 lakh mark in Indian markets, the question about which is the better investment – gold or equities – continues.
The Nifty 500 has yielded 2.84% return so far in 2025 (YTD). Meanwhile, it continues to rally. The 24 carat gold rate today has surged well over Rs 1.20 lakh per 10 grams from Rs 78,000 per 10 grams at the start of 2025, This marks an increase of approximately 56%.
Zerodha co-founder Nithin Kamath recently noted on X that “Indian households have around $3 trillion worth of gold, according to World Gold Council estimates.” He pointed out that “while equities fund business growth, most of this gold remains locked away, earning nothing.”
His comment has renewed the attention on how the yellow metal performed compared to equities in recent years. In 2024, gold gave investors a 44% return, its strongest annual performance in nearly three decades. The Nifty 500 index, which reflects the broad Indian equity market, rose 33% in the same period. It was one of the few years when both asset classes delivered strong returns together, but gold still led the scoreboard. The difference is more pronounced in the data for 2025 so far at 56% gold returns V 2.84% returns by Nifty 500 in 2025 as of now .
When gold protected capital
Gold’s role as a defensive asset is visible in specific years. In 2008, as the Nifty 500 fell 57%, gold rose 25%. In 2011, equities declined 26% while gold gained 38%. In such years, holders of physical gold preserved purchasing power and avoided large nominal losses. The dataset counts five years (1998, 2001, 2008, 2011, 2018) when gold delivered positive returns while the equity market returns were negative.
When gold outperformed, and why it matters
Gold outperformed the Nifty in 12 of the last 29 years, sometimes during crises and sometimes in normal years.
Not every year tells the same story. In 2009, gold rose 33 per cent, but the Nifty jumped 91%, so equities clearly did better. In 2011, gold went up 38% while the Nifty fell 26%; in 2020, gold gained 28% Vs the Nifty’s 18% gains, and in 2024, gold rose 44% while the Nifty increased 33%. The 2024 gain stands out because it is the highest in the series. Interestingly, equities too delivered strong gains last year. However, one must remember that gold hasn’t always been exciting. From 2013 to 2018, rupee gold prices hardly moved, as per the data shared by Kamath.
Key factors driving gold’s rise
A look now at the key factors driving the gold rally-
1. Central bank buying
Global central banks, led by China, Russia and Turkey, continued to add gold to their reserves. This sustained demand kept international prices firm through the year.
2. Inflation and rates
Even as inflation moderated, real interest rates remained low. The lower cost of holding non-interest-bearing assets like gold supported prices.
3. Currency effect
In dollar terms, gold prices have risen about 17%. The rupee’s depreciation against the dollar magnified domestic returns to around 44%.
Together, these factors helped gold outperform equities on a rupee basis. As a result, gold delivered a 44% return in 2024 and a 56% return so far in 2025. Over the years, steady central-bank buying, festival demand, and global uncertainties have often squeezed supply and lifted prices. But gold is not immune to volatility. In 2013, for instance, it fell 18% even as the Nifty gained 5%. The index shot up 91% in 2009 and crashed 57% in 2008.