Gold Or Share Market: Which asset has given the highest returns to investors in the long term.
The price of gold in foreign markets is $4,123 and in India the price of gold is Rs 1,26,090. At the beginning of the year, gold was trading around $2,600 in US dollars and a little less than Rs 80,000 in Indian markets. The performance of gold in 2025 has sparked a debate among investors. Is investing in gold a better option than shares? According to me, this question itself is wrong. We will know the reason for this later.
First, let’s look at why investors are comparing gold returns to stocks. Here, we compare Sensex returns in rupee terms with gold returns in US dollar terms, both on the basis of compound annual growth rate. Historically, the rupee has depreciated about 3 percent annually against the US dollar.
Gold’s Golden Performance
So far in 2025, gold has completely outperformed the stock market. Sensex and Nifty have seen an increase of 8 percent and 9.5 percent in the current year. On the other hand, gold has given a return of 58 percent so far. This growth has not happened suddenly. In the calendar year 2024, gold saw a rise of 27 percent. Whereas in the year 2023, gold had given a return of 13 percent. You can say that this sample size is quite small regarding the performance of gold. So let’s compare the mid to long term returns of gold and stock market.
Comparison of gold and stock market in 5 years
First, let’s look at the returns for 1, 3 and 5 years. The recent performance of gold has forced investors to pay attention. In the last 1 year, gold has increased by a whopping 61 percent, while the Sensex has increased by only 9 percent. If we expand a bit, in the last 3 years gold has given 32 percent returns, while Sensex has been able to give 11 percent returns. The same story is visible when comparing returns of 4 and 5 years. In the last 4 years, gold has given 23 percent return and Sensex has given 9 percent return. In the last 5 years, gold has given 16 percent return and Sensex has given 14 percent return. Comparison of returns shows that gold has snatched away all the gains in the last 5 years.
Who is ahead gold or stock market in long term?
In the last 25 years, the CAGR of gold has been 11.5 percent. In the same period, Sensex has given a CAGR of 13 percent. This is a difference of 1.5%, which translates into a huge amount in currency terms in the long run. In the last 20 years, gold gave a return of 11 per cent, while the Sensex gave a return of 12 per cent. In the last 15 years, gold gave a return of 7.7 per cent, while the Sensex gave a return of 10 per cent. In the last 10 years, gold gave a return of 12.7 per cent, while the Sensex also gave a return of 12.7 per cent.
This clearly shows that returns from both gold and equities over 10, 15, 20 and 25 years have been in a similar and competitive range. Note that this is a point-by-point performance, not rolling returns, which would have provided a better comparison.
However, there is a warning for those investing in gold. Gold has also shown stability over long periods of time and has even been underwater for long periods of time. In November 1980, gold was at $600, remained below that price for a long time, and returned to the $600 level only in March 2006, after 25 years of negative returns.
Is gold a better investment option?
Now, let us see whether gold should be considered better than equities as an investment option, as it has given comparable and even better returns than risk assets. As history shows, gold as an asset class performs better in uncertain times. Gold’s recent strong performance is largely due to ongoing economic and geopolitical risks. In the last 3 years, central banks have been showing increasing interest in purchasing gold, due to which the prices are increasing.
In short, in the short to mid term, gold’s returns have been much higher than the equity market returns, while in the long term, its performance has been at par with the equity market. As most financial planners suggest, it is ideal for retail investors to invest 10 to 15 per cent of their investment portfolio. And, when it comes to owning gold, investing in gold ETFs proves to be a less expensive way than buying physical gold.