Stock Market · Currency, Commodity & GSec

Gold and silver

Gold has been stored value for 5,000 years. Silver has industrial uses plus a store of value role. Both trade on MCX and can be accessed via ETFs, mutual funds, or Sovereign Gold Bonds.

Why gold?

• Crisis hedge: gold rises when equity markets crash (2008, 2020, 2022).
• Inflation hedge: gold historically preserves purchasing power over decades.
• Currency hedge: when the Rupee weakens, gold in INR terms rises.
• No default risk: unlike bonds or FDs, gold can't go bankrupt.

Gold vs Nifty returns (long-term)

Over 20-year periods, gold and Nifty have similar annualised returns (~13-15% CAGR in INR). But gold comes in long stretches of underperformance (2012-2018) followed by explosive runs (2019-2020, 2023-2024).

> Those long flat stretches are the same property read over two timeframes: they make gold a punishing thing to trade week to week, and a useful thing to hold while equity is having a bad decade.

Silver

Silver is more volatile than gold. It has a large industrial demand component (solar panels, electronics). When economies boom, silver outperforms gold. In crashes, silver falls harder than gold initially.

The gold/silver ratio (ounces of silver to buy 1 ounce of gold) ranges from 40 to 120. Extremes indicate relative value opportunities.

How to hold gold in India

Physicaljewellery/bars. High making charges, storage risk, no income

Gold ETFliquid, traded on exchange, tracks gold prices

Sovereign Gold Bond2.5% interest + an exempt gain, if you hold all 8 years

Gold mutual fundholds a gold ETF for you, no demat needed, one more layer of fees

Takeaway. Gold is a crisis hedge and inflation hedge, not a growth asset. Silver swings harder because of its industrial demand. The paper routes skip the making charges and storage risk that physical gold carries, and which of them fits turns on how long the money can stay put.