Gold returns beat equities, realty in 20-yr period

Investing in gold trumped most other asset classes in terms of compounded annualised returns over the long term, suggests a report by FundsIndia.

Illustration: Dominic Xavier/Rediff

While Indian equities gave a compounded annual return (CAGR) of 13.5 per cent in 20 years (as measured by Nifty 50 total return index, or TRI), gold (in rupee terms) surged 15 per cent.

Real estate, with a CAGR of 7.8 per cent, and debt, at 7.6 per cent, were at the bottom of the pyramid, according to the FundsIndia study.

Return from Indian equities (in rupee terms) at 13.5 per cent over 20 years was lower than the 14.8 per cent CAGR given by US equities, as measured by S&P 500 TRI in rupee terms.

Return from real estate was calculated based on NHB Residex (which considers returns for five cities from December 2002 to December 2008 and for 15 cities from December 2008 to September 2025).

Central banks led the demand for gold and pushed up the metal’s price, said G Chokkalingam, founder and head of research at Equinomics Research.

“That apart, gold’s safe-haven appeal never dulled for retail investors in the last few years amid aggressive central bank policies, geopolitical concerns, rupee depreciation and steep equity valuations,” he said.

Over a shorter duration of five years, the CAGR return from gold was even better at 23.2 per cent compared to 16.5 per cent for Indian equities and 19.6 per cent for US equities, the FundsIndia report said.

Experts believe gold prices will increase next year amid safe-haven buying as geopolitical risks continue. Limited production due to challenges in mining is another reason for high prices.

“It’s predicted that by the end of 2026, gold could rise to $5,000 per troy ounce.

“Global central banks are expected to maintain their gold-buying momentum, which will be key to gold hitting that $5,000 value mark.

“Gold will continue to see a significant rise, especially if current inflation and uncertainty trends persist,” said Rick Kanda, managing director of UK-based The Gold Bullion Company.

Mid, smallcaps

The report said that over 20 years, midcaps (16.5 per cent, Nifty Midcap 150 TRI) and smallcaps (14.3 per cent, Nifty Smallcap 250 TRI) had a higher CAGR return than largecaps (13.8 per cent, Nifty 100 TRI).

“The retail investor base 10 years ago was around 60 million, which has swelled to over 200 million now.

“Most people invest in the small and midcap universe in order to make quick money.

“That said, the economic growth over the years has also helped companies in these two segments score over their large-cap peers, which translated into superior market returns for the small-and midcaps,” Chokkalingam said.