Mumbai: Gold has once again proven to be a better investment than stocks during the Diwali-to-Diwali cycle. For the fourth consecutive year, gold gave higher returns than the Nifty 50 index. In fact, gold has outperformed equities in seven of the last eight Diwali periods.
Huge Jump in Gold Prices
According to the India Bullion and Jewellers Association (IBJA), the price of 24-carat gold stood at Rs 11,431 per gram. Gold prices on the Multi Commodity Exchange (MCX) have jumped by nearly 40 percent since last Diwali. In comparison, the Nifty 50 index rose only about 5 percent in the same period.
In 2024 alone, gold returned 32 percent, while the Nifty gave 24 percent. A year earlier, in 2023, gold rose by 21 percent, and the Nifty only managed 10 percent.
Why Gold is Booming
Several reasons are behind this gold rally:
Safe-haven demand: With global tensions and economic uncertainty, people are turning to gold.
Central bank buying: Many Asian central banks are buying gold to reduce dependence on the US dollar.
US Fed policies: Expectations of interest rate cuts by the US Federal Reserve have made gold more attractive.
Weaker labour data: Recent US job numbers suggest slower growth, supporting gold prices.
In September, gold prices hit a record high of USD 3,683 per troy ounce before slightly falling due to tough Fed comments.
Silver Also Joins the Rally
Silver has also performed well. It has outdone Indian equities for the third year in a row. This is due to high industrial demand from sectors like solar panels, semiconductors, and electric vehicles. As of yesterday’s market close, silver was priced at Rs 1,34,050 per kilogram, according to IBJA.
Analysts think gold could continue doing well for another year. US firm Goldman Sachs even said gold might reach USD 5,000 an ounce if investors move just a small part of their money from US bonds to gold.
But experts warn that the rally may be too stretched and could reverse, just like it did after peaking in 2011.
