Gold prices in India climbed higher on Wednesday, December 17, moving closer to their all-time peak. The rally was fueled by positive global trends and increasing speculation about interest rate reductions by the US Federal Reserve, following data indicating a rise in US unemployment in November.
Price Movement and Market Drivers
On the Multi Commodity Exchange (MCX), February gold futures contracts advanced by 0.55% to reach ₹1,35,150 per 10 grams. This placed the precious metal just shy of its previous session's historic high of ₹1,35,346. Market experts attributed this upward movement to gold's enduring status as a preferred safe-haven asset during times of economic unpredictability.
An analyst specializing in bullion markets noted, "Gold consistently acts as a stabilizer when financial markets anticipate monetary policy easing or encounter macroeconomic stress." This sentiment underscores the metal's role in investor portfolios during uncertain periods.
A Four-Decade Compounding Powerhouse
A comprehensive analysis from WhiteOak Capital has shed light on gold's remarkable performance as a hedge against volatility and inflation over nearly four decades. The report reveals that gold has not only protected wealth during years when Indian equities suffered losses but has also generated competitive long-term returns, cementing its place in diversified investment strategies.
The long-term compounding effect is staggering. An investment of ₹100 in gold back in 1985 would have grown to approximately ₹6,518 by March 2025. This growth significantly outpaces traditional bank deposits, which would have reached only ₹2,100, and the inflation-adjusted value of ₹1,478 over the same period.
While the BSE Sensex delivered an even higher value of ₹13,484 from the same ₹100 starting point, it achieved this with substantially greater volatility. Gold, in contrast, provided steadier compounding and crucial downside protection during turbulent market phases.
Performance Across Different Starting Points
The report provides compelling comparisons for investments made in different decades:
- Equities (BSE Sensex): ₹100 invested grew to ₹2,374 (1995), ₹1,192 (2005), and ₹277 (2015), showing periods of underperformance versus gold.
- Bank Deposits: Offered modest, low-risk growth to ₹859 (1995), ₹400 (2005), and ₹183 (2015).
- Inflation-adjusted Value: Stood at ₹656 (1995), ₹355 (2005), and ₹161 (2015), highlighting limited real wealth creation without strategic asset allocation.
Gold's resilience is further demonstrated by its consistent Compound Annual Growth Rate (CAGR): 11.0% starting 1985, accelerating to 14.3% from 2005, and maintaining a robust 12.9% from 2015 onwards.
Gold as a Counter-Cyclical Asset
The financial year-wise analysis confirms gold's unique ability to perform well when equities falter. In several instances where domestic stock markets posted negative returns, gold delivered sharp gains, effectively smoothing portfolio volatility.
From the fiscal year 2011 to the fiscal year-to-date 2026, gold generated a CAGR of 13.9%, making it the second-best performer among major asset classes, trailing only the S&P 500 TRI (in INR terms). For example, during FY2012 when the BSE Sensex fell 9.2%, MCX Gold surged by 32.9%. Similarly, in FY2020 during a 22.9% Sensex decline, gold jumped 29.7%.
This track record proves that gold has offered investors not just safety but also competitive returns compared to riskier assets over the long run.
Technical Outlook and Near-Term View
On the technical front, analysts anticipate gold to trade within a defined range in the short term. Renisha Chainani, Head of Research at Augmont, stated, "Gold is expected to trade in the range of $4,300 (approximately ₹133,000) on dips around support to book profits near resistance." She added that ongoing global uncertainty and anticipated policy actions from the US Federal Reserve are likely to continue supporting bullion prices.
Disclaimer: The views and recommendations mentioned are those of individual analysts or broking companies. Investors are advised to consult certified experts before making any investment decisions.
