Gold has beaten Nifty 50 over a 2-year and 5-year period but underperformed over a 10-year and 3-year period. Yellow metal outperformed Nifty in 3 out of 10 years between 2014 and 2024.
Data from PMS Bazaar shows that from FY22-24, MCX Gold returned 14.05 per cent compared with 13.1 per cent returned by the Nifty. From FY18-24, gold gained 16.1 per cent compared with 13.9 per cent returned by the Nifty. However, a comparison of yearly performance shows that the yellow metal and Nifty have a much lower correlation (see table).
Gold tends to outperform equities during times of economic turmoil. For instance, gold outperformed the Nifty 50 from FY08 to FY09, which was affected by the global financial crisis. In FY09, gold’s performance was about 25 per cent, while Nifty 50’s performance was down 36 per cent.
Similar outperformance was visible in FY20 during Covid-19-induced lockdowns and restrictions. The demonstration was repeated in FY23, which saw the Russian-Ukraine war. Gold was up 16 per cent and equity was down about 1 per cent.
“While equities have provided superior long-term returns compared to gold, gold possesses a unique ability to act as a hedge against volatile stock markets during economic downturns,” said PMS Bazaar in a note.