Daijiworld Media Network – New Delhi
New Delhi, Jan 4: Gold has witnessed an unprecedented rally over the past decade, outperforming nearly all other asset classes and challenging conventional theories of market risk diversification. Indian households, estimated to hold over 34,000 tonnes of gold, have emerged as some of the most successful long-term wealth holders, with the precious metal delivering returns that rival and, in some periods, surpass equity markets.
Over the last 20 years, gold prices have risen nearly tenfold, marginally outperforming the BSE Sensex, which grew nine times in the same period. Over a 30-year horizon, returns from gold and the Sensex have largely mirrored each other. This sustained performance has reinforced the belief among many Indians that gold is a cornerstone of financial security.
The appeal of gold lies in its simplicity, liquidity and tangibility. Unlike financial products, gold is easy to understand and widely accepted across households. Despite technological advancements and increased access to equity markets through digital platforms, less than 10 per cent of Indians participate directly in equity market growth. In contrast, gold is present in almost every household, making it one of the most democratised assets in the country. As a result, households holding gold in jewellery or other forms are wealthier today than ever before.
Financial planning, however, hinges on generating returns that outpace inflation, ideally by two to three times. Looking ahead to 2026, multiple factors are expected to influence investment outcomes. India is projected to remain the world’s fastest-growing major economy, with analysts forecasting strong profit growth for companies listed on benchmark indices. The Reserve Bank of India has indicated a benign inflation outlook, and interest rates are expected to trend downward, providing support to equity markets. Domestic mutual funds continue to attract strong inflows, while foreign portfolio investors, despite being net sellers recently, still hold significant stakes in Indian equities and are likely to return once earnings growth stabilises.
Despite these favourable indicators, risk perception in global financial markets remains elevated. Recent geopolitical developments, including US military action in Venezuela and the capture of its president, have added to global uncertainty. Ongoing geopolitical tensions and strained trade relations could push investors towards safe-haven assets, further supporting gold prices, which are already at record highs.
Historically, gold prices tend to remain stable even after sharp rallies, as steady inflows from central banks and financial institutions provide support. Unlike equities, which can be volatile during downturns, gold rarely sees sharp crashes. However, rising gold prices often reflect fear and uncertainty, while rising equity and bond markets signal confidence in future economic growth.
Experts stress that no single asset class should dominate a portfolio. While gold has delivered strong returns and acts as a hedge against risk, diversification remains essential for preserving and growing wealth over the long term. Maintaining a balanced mix of assets is crucial, regardless of how well a particular investment performs in a given period.