Who Moved My Gold

The yellow metal, also a hedge for stock market volatility, reacts more to real interest rates and not nominal interest rates

- Gaurav Rastogi

The price of gold in Indian rupees is up roughly 10x in the past 20 years, which translates to a respectable 12 percent per annum returns. Add to this the commonly known characteristics of gold as one of the better-known hedges to equity market volatility, especially around market crashes, and a hedge to rupee depreciation against the US dollar, and we have an asset that we all should have higher allocations too.

Extremely few investors, however, stayed invested for the whole time as almost all the gains came in two small windows. Between 2008 and 2013, international gold price tripled and then between 2019 and 2020, it roughly doubled again.

The last decade was remarkably interesting for gold price movement. Gold doubled to ₹3,000 per gram from ₹1,500 per gram between 2010 and 2013, but then stayed in a narrow band between ₹2,000 and ₹3,000 per gram for six years. At the time when people were writing it offas an asset, it made a remarkable run past ₹5,500 per gram in late 2020. Indians who own physical gold were probably the only ones who stayed invested as they bought the yellow metal for different purposes.