Gold vs Sensex: long-term debate sparks Indian investors

Gold vs Sensex: The Long View and the 2025 Spark

Look, gold has surged this year, but the longer story is more nuanced. In 2025, gold gains have been striking—roughly +55% for the year—while the Sensex has inched up by around 8-9%. Over the last 25 years, the math looks different: gold’s CAGR sits at about 12%, while the Sensex has delivered around 13%. So yes, gold shines in the near term, but the broad, longer horizon hasn’t favored gold as consistently as equities.

Beyond that short window, gold’s last two decades have been mixed. Over 20, 15, and 10 years, gold has performed well—roughly in the 11% to 13% range—but often not quite keeping pace with the Sensex’s longer-term rise. The big caution: gold also has long periods of stagnation. The classic example is 1980–2006, when gold prices stayed below the $600 mark for more than two decades. Yet today’s world—featuring rising economic and geopolitical risks—helps explain why central banks are steadily increasing their gold holdings. That appetite keeps gold in the investment conversation as a hedge and diversifier.

In India, the practical takeaway remains clear. Financial planners typically suggest a 10-15% allocation to gold within a diversified portfolio. The appeal? Gold ETFs offer a cheaper, more convenient route to exposure than owning physical gold, without the storage and security hassles, while still letting you participate in the metal’s resilience during risk-off periods.

Here's the thing: the overlap between macro risk and portfolio design is where gold earns its keep. When inflation fears rise or currency volatility bites, a portion of gold often acts as ballast. But when growth is steady and real rates improve, stocks may lead. The Indian context matters—for many households, gold is not just an investment but a cultural part of financial planning, with tax treatment and payment options that influence how people choose to allocate.

Practical Takeaways for Indian Investors

Look, this is a reminder to keep a balanced lens. Gold can anchor a portfolio during turbulence, but it isn’t a perpetual outperformer. If you’re aiming for the typical Indian mix, a steady approach helps:

• Consider a deliberate gold allocation of 10-15% of your portfolio, tuned to your risk tolerance and goals.
• Use Gold ETFs for exposure instead of physical gold to save on costs and avoid storage hassles.
• If you prefer a disciplined approach, try a small monthly SIP into gold ETFs or a dedicated gold savings fund.
• Be mindful of the cost of timing. Short-term moves (like the November dip) are common; your strength is in the long run and diversification.
• Keep in mind tax and practical considerations. Physical gold carries making charges and, in India, tax rules differ from ETFs—seek professional guidance to optimize your tax outcome.

The world is uncertain, and investors should expect volatility. Yet the current landscape—central banks’ growing gold purchases, the ongoing risks from geopolitics and macro shifts—keeps gold as a meaningful piece of an Indian portfolio.

The bottom line: gold remains relevant for risk management and diversification, even as equities continue to power long-run gains. Your best move is a thoughtful split that reflects your needs, not just the headlines.