MUMBAI — Gold outshone all other asset classes in FY25, delivering an impressive 41% return in dollar terms, according to a report released Monday by the National Stock Exchange (NSE). The surge in gold prices was largely driven by its traditional appeal as a safe-haven asset amid ongoing global uncertainty. However, the report emphasized that over longer investment horizons, Indian equities have consistently delivered superior returns, reinforcing their role as a primary wealth-building asset.
Global demand for gold climbed to a 15-year high, fueled by strong investment inflows and sustained central bank purchases. Notably, central banks have added over 1,000 tonnes of gold to their reserves for the third consecutive year, as part of broader reserve diversification strategies.
India mirrored this global trend, with the Reserve Bank of India (RBI) ranking as the third-largest official buyer of gold over the past three and five years. Gold now accounts for more than 11% of India’s foreign exchange reserves, the NSE report highlighted.
While demand for gold jewelry softened due to high prices, investment demand surged, particularly in Asia, with China and India leading purchases of gold bars and coins. Gold-backed exchange-traded funds (ETFs) also saw a sharp rebound globally, reversing multi-quarter outflows. India, in particular, recorded strong inflows into gold ETFs, reflecting investor appetite during periods of market volatility.
India’s financialized gold ecosystem continues to expand, anchored by Sovereign Gold Bonds (SGBs), which offer fixed returns, tax efficiency, and sovereign-backed security. Since their inception in November 2015, SGBs have mobilized nearly 147 tonnes of gold, amounting to ₹72,274 crore, underscoring their popularity among Indian investors.
“Persistent geopolitical risks and macroeconomic uncertainty continue to support demand for gold,” the report stated, adding that central banks are likely to remain key structural buyers as they adapt their reserve strategies in an increasingly fragmented global economy.
Despite gold’s strong recent performance, the NSE noted that Indian equities have outpaced gold over the long term. Over the past 20 years, the Nifty 50 index has delivered an annualized price return of 13%, with total returns (including dividends) reaching 14.4% — significantly outperforming gold across comparable periods.
The report also highlighted a resurgence in demand for physically backed gold ETFs following nine consecutive quarters of net outflows. Starting in the third quarter of 2024, global geopolitical tensions and trade uncertainties reignited investor interest in gold as a safe-haven asset. Momentum accelerated into the first quarter of 2025, with net inflows reaching $21 billion (226 tonnes) — the highest in 19 quarters and second only to the post-pandemic surge in Q2 2020.
India closely followed this global trend, recording robust gold ETF inflows over the past five years, particularly during episodes of heightened market volatility and inflation concerns.
While gold continues to play a critical role in hedging against uncertainty, Indian equities remain the standout performer for long-term investors, driven by consistent economic growth and corporate earnings. (Source: IANS)
