While the last year has seen the benchmark Sensex deliver strong double-digit growth, the long-term data shows that gold and silver have historically provided superior average returns. This points back to the vital role of diversification in an investor’s portfolio.
This contrast highlights the different roles equities and precious metals play. While stocks offer volatility and the potential for rapid gains, gold and silver act as long-term wealth preservers and effective hedges against market uncertainty and currency devaluation.
Sensex Vs Gold Vs Silver: Over One Decade
In the last 10 years, gold returned negative returns of 7.31%. The returns over the decade have swung into profit and loss due to the high volatility in the hard assets’ prices. This still stands lower compared to the 12.32% loss in silver, as per YA Wealth Global’s data.
Gold’s returns over the last five years stand at an impressive 33.15%, while silver had returned a higher gain of 37.23% over the same period. During this period, the Sensex managed to return 2.64%.
In the last two years, the performance of gold dipped to returns of 6.37%. while silver slipped to losses of nearly 10%. In contrast to the safe-haven metals, the Sensex returned a stellar 49.75% during the year.
Taking this month into consideration, due to a surge in safe-haven demand. the yellow metal returned the highest among the lot. While gold returned 43.76%, the returns on silver stood at 44.65%. These compared to the Sensex delivering nearly 2% gains this year.
The Long-Term Case for Bullion
For investors who feel they missed the recent rally in precious metals, market experts suggest focusing on long-term data over short-term price movements.
Anuj Gupta, director at YA Wealth Global, noted that the enduring positive trend in precious metals often outpaces equities over multi-year cycles. “It seems that the trend of gold and silver are in a positive trend since the last couple of years, however, the trend of equity means Sensex is also in a positive way,” Gupta stated.
He provided a data point on long-term averages, “The only difference is that the average return of Sensex in the last 10 years is almost 11.36%, but the gold average return is 14.81% and silver average return is 13.82%.”
This comparison clearly shows that over a decade, both gold and silver have comfortably outperformed the Sensex on average returns.
As Gupta summarises, the long-term performance figures are “also showing the benefit of diversification in different asset classes”. This principle allows investors to cushion their portfolios against cyclical downturns, when stocks are volatile, gold often rises, and vice-versa.
. Read more on Markets by NDTV Profit.