Gold prices at record high! Have yellow metal prices peaked? Check these 5 charts before putting more money in gold – The Times of India-OxBig News Network

Gold has since ages been seen as a safe haven investment bet, especially in riskier times when other asset classes face uncertainty. But is gold just a safe haven investment or is it also a wealth creator? How do gold returns compare to equities over years and what is the outlook for the precious metal? With the ongoing global turmoil, gold may be seen as the go-to investment bet, especially for relatively conservative investors, but have gold prices peaked?
Gold’s performance as both a safe haven and wealth generator has garnered attention, with its 17% three-year returns outpacing Sensex’s 11.6%. As prices approach Rs 90,000 per 10 gram, what should investors do – should they allocate more of their portfolio to gold or is it time to book profit? We take a look at an analysis from ET Wealth to answer this key question:

Why is gold going up?

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Gold Outlook: Will the rally slow down?

Experts, including Mehta, suggest that gold’s upward momentum could potentially slow as diplomatic negotiations bring market stability and inflation remains controlled. Ventura Securities is of the view that gold prices might have limited upside due to a robust dollar and uncertainty surrounding US Federal Reserve interest rate reductions.
Experts indicate that gold’s immediate risk-reward profile appears unfavourable. Current market analysis suggests the precious metal is overvalued. Historical data examination of gold prices from the 1970s indicates an unusually significant gap between current prices and the 200-day moving average. This situation has historically preceded extended periods of price decline following rapid growth phases.
Niranjan Avasthi, SVP and Head– Product, Marketing & Digital at Edelweiss Asset Management, indicates that gold currently appears more expensive compared to equity investments.
Research of the Sensex to gold ratio since 1999 demonstrates that a ratio under 1 typically precedes equity outperformance over subsequent three years, whilst a ratio exceeding 1 suggests gold outperformance.

The present ratio stands at 0.86, below the 0.96 long-term average. Avasthi says, “equities may outpace gold in the next three years,” suggesting gold’s current overvaluation.

Gold Long-Term outlook

“In the long term, the policies implemented by central banks are likely to have a profound impact on the gold market,” insists Mehta.

“Considering recent developments, central banks may opt to ease their monetary policies further, potentially moving away from reliance on a dominant currency holding. Such a shift could create a more favourable environment for gold, as the precious metal is traditionally viewed as a diversifier in times of competitive currency devaluations and economic instability.”
The assessment of gold’s future prospects finds support from Krishan Mishra, CEO of FPSB India, who states, “Given its historical track record and consistent demand, gold’s rally may still continue, particularly in uncertain economic environments.”
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Gold: Country-wise Analysis

Historical data on gold performance shows compelling statistics. Based on DSP Mutual Fund analysis, gold investments have yielded superior returns compared to stocks in both developed nations (with typically modest stock market gains) and emerging economies (with potentially higher stock market returns) during the previous 25-year period (see visual). The sole exception remains India, where equities have marginally surpassed gold.

An analysis of the last two decades indicates that a mere 11% of S&P 500 stocks surpassed gold’s performance. The situation was more pronounced in the UK and Japan, where only 1% of stocks achieved this distinction.
Whilst Indian stocks demonstrated better results, the majority still struggled to match gold’s performance. Approximately 57% of NSE 500 index constituents have underperformed compared to gold during this timeframe. This data demonstrates the considerable challenge in surpassing gold’s investment returns.
Gold Investment: The flip side
Analysis of rolling returns data compiled by Avasthi reveals that gold’s performance is less impressive compared to equities. The rolling returns methodology, which evaluates performance across various time periods without temporal bias, demonstrates that the BSE Sensex has generally yielded better returns than gold since 1984.
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The statistics show that gold surpassed equity performance in approximately 35% of instances, considering both 5-year and 10-year rolling return periods.
Gold and equities share similar cyclical patterns, with periods of substantial gains followed by decline in performance. Historical data from FundsIndia reveals that since 1980, gold has experienced significant declines exceeding 30% on three separate occasions, causing pain for investors.
The precious metal has shown extended periods of stagnation in returns. A notable example is the decade-long wait to reach its 1980 peak, whilst another instance shows a seven-year period to recover its 2012 peak value. Additionally, gold exhibits volatility comparable to equities.

FundsIndia’s analysis demonstrates that gold has traded at levels more than 10% below its peak on 51% of trading days. In comparison, the Sensex showed similar behaviour, trading below this threshold on 49% of occasions. These characteristics should be considered carefully whilst evaluating gold’s current dominance in the market, the ET Wealth analysis says.
What should investors do?
Experts emphasise that gold serves as an essential component in a diversified investment portfolio. Although traditionally recognised as a safe-haven asset, gold’s significance transcends beyond mere portfolio diversification.
Nevertheless, investors should exercise caution regarding gold’s recent performance and avoid excessive allocation.

Research conducted by PrimeInvestor in 2024 revealed that incorporating gold into an equity-only portfolio between January 2003 and present, across 3-, 5-, and 10-year intervals, enhanced average returns whilst reducing loss probability and limiting downside during challenging periods.
The study demonstrated that risk-adjusted returns showed significant improvement when investors allocated 10% to 20% in gold alongside equities. However, increasing allocation beyond these levels proved ineffective.
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