Gold vs Equities: Performance Depends on When and Where You Invest

Gold has beaten equities in many major markets over the 21st century, but the comparison is not straightforward. There is no single answer to which one of the two– gold and stocks is better. Returns differ across time periods and across countries. The data shows that equities tend to do better over medium-term horizons, while gold has delivered stronger results over longer stretches, but only in several markets.

Data compiled by DSP Mutual Fund shows that over rolling five-year periods, gold has not consistently outperformed equities. In India, measured against the Sensex Total Return Index (TRI), gold outperformed stocks only 23 per cent of the time. In the US, gold beat the S&P 500 TRI in 36 per cent of rolling five-year windows. The figures rise to 38 per cent in China and 50 per cent in Europe, indicating that even in regions where gold has done relatively better, it has still not been the dominant performer across most medium-term periods.

This pattern challenges the idea of gold as a universal outperformer. As per the analysis by DSP Mutual Fund, the rolling return data shows that equities have delivered superior outcomes more often than gold over five-year horizons, particularly in markets like India and the US. At the same time, the results are not uniform across regions.

A longer-term view, however,  tells a different story.

Since the start of the 21st century (data since end-1999), gold has beaten every major equity market in local currency terms. In developed markets, gold’s annualised returns stand at 13.0 per cent in Japan, 11.9 per cent in the UK, 10.5 per cent in France, and 11.1 per cent in the US, all higher than corresponding equity market returns. The excess returns range from 1.3 percentage points in Australia to 7.6 percentage points in Japan.

The gap is wider in emerging markets. Gold’s annualised returns since the start of the 21st century (data since end-1999) are 31.5 per cent in Turkey, 47.0 per cent in Argentina, and 16.0 per cent in Brazil, exceeding equity returns in each case. Even in India, gold’s returns of 14.3 per cent marginally exceed equity returns of 13.3 per cent over this period.

Stock-level data reinforces this divergence. Over the last 20 years, only 24 per cent of NSE 500 stocks in India have outperformed gold. In the US, just 5 per cent of S&P 500 stocks beat gold, while the figure drops to 1 per cent in the UK and 2 per cent in Japan.

Taken together, the data show that equities tend to outperform gold more often over medium-term rolling periods, but over longer horizons, particularly since the start of the 21st century, gold has delivered higher returns across both developed and emerging markets. The relative performance of gold and stocks, therefore, depends not on a single rule, but on the time frame and the market being examined.