Gold has, on an average, returned 11.2 per cent in the last 20 years, according to a study by a financial technology company. The Smallcase report released on November 8, 2023 said that the demand for gold is likely to remain robust during the festive season, especially Diwali.
With Dhanteras just round the corner on November 10, 2023, many Indians are exploring options to buy gold. Recent returns according to data from the Reserve Bank of India (RBI) also shows that sovereign gold bonds (SGBs) are an attractive investment avenue. SGBs delivered an annual return of 17.35 per cent, in addition to a 2.5 per cent annual interest, according to RBI data on the last 11 SGBs that saw redemptions.
According to the Smallcase report, in times of geopolitical uncertainty, gold is expected to trend higher in the immediate term. The study also shows how gold performed in the last 20 years.
Gold has shown a consistent positive performance over the last 20 years, with only negative returns observed in 2013, 2015, and 2021. Gold performed exceptionally well in 2011, with the highest return of 30.7 per cent. Other standout years include 2010 (24.8 per cent), and more recently in 2020 (28 per cent) and 2019 (21.3 per cent).
In the last five years (2018-2022), gold showed a mix of positive and negative returns, but it generally maintained a positive trend.
Gold had given positive returns in 2018 (7.3 per cent), 2019 (21.3 per cent), 2020 (28 per cent), and 2022 (10.8 per cent). Year-to-date (YTD) in 2023, gold has already gained 3.3 per cent taking the return till 2022 to 11 per cent compounded annualised growth rate (CAGR), the study said.
Historically, during times of market turmoil, investors tend to seek safety in gold. For instance, while Nifty returns have been negative during the Covid-19 crisis or the Russia-Ukraine war, gold returns exceeded 20 per cent.
Gold also serves as a robust hedge against inflation, outperforming Nifty 50 during high inflation periods. From April 2021 to May 2022, as inflation rose by 5.4 per cent, gold returned 13.6 per cent, while Nifty 50 yielded 11.6 per cent, the report added.