Is Gold the Top Asset Performer in FY25 While Equities Excel Long-Term?
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Synopsis
In FY25, gold shines as the top asset performer with a remarkable 41% increase, reflecting its role as a safe haven during global instability. Yet, Indian equities have displayed stronger long-term returns, showcasing their wealth-building potential. This article delves into the dynamic interplay between gold and equities in the current financial landscape.
Key Takeaways
- Gold appreciated by 41% in FY25, marking it as the best-performing asset.
- Indian equities have outperformed over the long term, highlighting their wealth-building potential.
- Global gold demand reached a 15-year high, driven by investment inflows and central bank purchases.
- Sovereign Gold Bonds have mobilized nearly 147 tonnes of gold since 2015.
- Gold ETFs saw a revival in Q1 2025, reflecting increased demand amid geopolitical tensions.
Mumbai, April 28 (NationPress) Gold has emerged as the top asset performer in FY25, appreciating by 41 percent in dollar terms, attributed to its status as a safe-haven investment amid global uncertainties, according to the National Stock Exchange (NSE) on Monday.
However, in the long run, Indian equities have provided superior returns, highlighting their effectiveness as a wealth-building vehicle. Global demand for gold has soared to a 15-year high, driven by strong investment inflows and persistent central bank acquisitions — surpassing 1,000 tonnes for the third consecutive year — as part of a wider trend of reserve diversification.
“India demonstrated this transition, with the RBI becoming the third-largest official buyer over the last three to five years, and gold now constituting over 11 percent of its foreign exchange reserves,” the stock exchange noted in its report.
While the demand for jewelry has softened due to elevated prices, investment interest has surged, particularly in Asia, with China and India spearheading bar and coin purchases. Gold-backed ETFs have experienced a remarkable recovery globally, reversing multi-quarter outflows, with India seeing significant inflows.
India’s financialized gold ecosystem has further developed through its Sovereign Gold Bonds (SGBs) — unique global instruments offering fixed returns, tax advantages, and sovereign security.
Since their launch in November 2015, SGBs have raised nearly 147 tonnes or ₹72,274 crore. With ongoing geopolitical risks and macroeconomic uncertainties, the fundamental demand drivers for gold remain robust. Central banks are anticipated to continue as key structural buyers as global reserve strategies evolve within an increasingly fragmented economic environment, as stated in the report.
Nevertheless, over extended investment periods, Indian equities have outperformed. Over the last two decades, the Nifty 50 has produced a 13 percent annualized price return and a 14.4 percent total return (including dividends), surpassing gold’s returns during similar durations.
After nine consecutive quarters of net outflows, physically-backed gold ETFs witnessed a resurgence in demand starting Q3 2024, as rising geopolitical and trade tensions reignited gold’s safe-haven allure.
Momentum increased in Q1 2025, with net inflows of $21 billion (226 tonnes)—the highest in 19 quarters and second only to the post-pandemic surge of Q2 2020. This rally was propelled by climbing gold prices, a weakening dollar, and global growth apprehensions, as outlined in the report.
India has closely mirrored the global increase in gold ETF demand, registering substantial inflows over the past five years — especially in times of market volatility and inflation worries.
Point of View
We at NationPress recognize the importance of understanding the current financial landscape. While gold has proven to be a resilient asset amid global uncertainties, the historical performance of Indian equities cannot be overlooked, especially for long-term investors. It is crucial for individuals to consider both options based on their financial goals and risk tolerance.
NationPress
21/05/2025
Frequently Asked Questions
What factors contributed to gold's performance in FY25?
Gold's performance in FY25 was driven by its appeal as a safe-haven asset amid global uncertainties and significant investment inflows, alongside sustained central bank purchases.
How have Indian equities performed over the long term?
Over the past 20 years, Indian equities, particularly the Nifty 50, have provided a 13% annualized price return and a 14.4% total return, outperforming gold during comparable periods.
What are Sovereign Gold Bonds (SGBs)?
Sovereign Gold Bonds are fixed-return, tax-efficient instruments backed by the government, providing a unique opportunity for investors to gain exposure to gold without needing to hold physical bullion.
Why is there a surge in gold ETF demand?
The renewed interest in gold ETFs can be attributed to escalating geopolitical tensions and inflation concerns, prompting investors to seek safe-haven assets.
What is the future outlook for gold and equities?
The outlook for both gold and equities remains optimistic, with central banks expected to continue buying gold, while equities may offer better long-term returns depending on market conditions.
