Finance Series · 04
Gold as an Investment
Gold is surging again. A look at why it moves, how it stacks up against Indian equities over decades, and how to actually buy it.
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Gold has always been more than a metal — it's a symbol of wealth preservation, a hedge against uncertainty, and a cultural cornerstone. Let's see why it's surging now, whether it's worth buying, and how it compares to equities.
The Recent Gold Surge (India, 22K)
- Current price: ₹12,170 per gram
- Increase: ~11.2% in just over two weeks (from ₹10,945)
Drivers:
- Geopolitical tensions (wars in Gaza & Ukraine) → safe-haven demand
- US Fed interest rate expectations → lower opportunity cost
- Central bank purchases globally → added demand
- De-dollarization → Russia & China increasing gold reserves
Historical Significance & Value
Gold's origin traces back to rare metal from asteroid impacts. Its properties — rust-resistant, easy to shape, limited supply — carried it through a long arc: religious symbol → first currency → gold standard backbone → freely traded commodity since 1971.
Gold vs. Indian Equities
Historical returns (CAGR & performance): over 10–20 years, gold delivered returns comparable to or exceeding the Nifty 50.
Volatility & drawdowns:
| Period | What Happened |
|---|---|
| 1970–1980 | Massive bull run → +2300% |
| 1980–2008 | ~28 years of near-zero returns, including a ~70% drawdown |
| 2002–2011 | Strong bull run → +570% |
| 2012–2015 | Drawdown ~45% |
| 2011–2020 | ~10-year period of near-zero returns |
Equity comparison (SENSEX/Nifty): Indian equities show steadier growth. Even during big crises — dot-com, 2008, COVID-19 — recovery periods were much shorter, longest around 5 years versus gold's 28-year and 10-year near-zero stretches.
Hedge benefits: gold consistently performs well during equity market crashes (2000, 2008, 2020, and recent corrections), acting as a stabilizer in a diversified portfolio when stock markets fall.
Pros & Cons of Investing in Gold
| Pros | Cons |
|---|---|
| Long-term wealth preservation | Volatile — long periods of low or zero returns |
| Hedge against equity crashes & inflation | Not guaranteed — value can fall and stay down |
| Portfolio diversification | Not a fixed deposit — short-term losses possible |
Buying Gold: Practical Tips
Physical vs. digital:
- Jewelry: high making charges → costly
- Coins & bars: more cost-effective
- Digital gold platforms: SafeGold, PhonePe Gold, Paytm Gold, Augmont, MMTC-PAMP
Investment strategy:
- Systematic investment: fixed amounts regularly, to mitigate timing risk
- Diversification: gold should complement equities, not replace them
- Long-term horizon: ideal for 5+ years, acting as a hedge, not primary growth
Who Should Invest
- Avoid: short-term investors seeking guaranteed returns (1–5 years)
- Invest: long-term investors seeking portfolio diversification, an inflation hedge, and stability during equity market downturns
Next: silver as an investment.
Originally published on LinkedIn.
Read the series — Finance Series
Finance Series index- 01Finance and Money Mindset
- 02Balancing Spending, Saving and Growth
- 03Why You Need Investments
- 04Gold as an Investment (this piece)
- 05Silver as an Investment
- 06What Is the Stock Market?
- 07Types of Earnings from Stocks
- 08What You Can Do in the Stock Market
- 09How to Choose Stocks
- 10Mutual Funds and ETFs: Investing Without Picking Stocks
- 11How to Choose the Right Mutual Fund for SIP
- 12Why Finance Should Be for Everyone
Muhammed Nasvih V
Lead DevOps & Cloud Engineer · Jeddah, Saudi Arabia
Writes The Stack Notes — field notes on infrastructure, AI, money and work. Cloud infrastructure, CI/CD, security and automation at Code7 Information Technology.
