Bought gold in India? Data shows why you have been winning all along

Business Standard

30-04-2025

Gold hasn't had a single negative-return decade in Indian Rupee (INR) terms — a claim the U.S. dollar can't match, said a new report by Capitalmind Financial Services Pvt. Ltd
While the world watches gold push towards $3,300 an ounce in 2025, driven by fears of US economic slowdown, trade wars, and ballooning deficits, Indian investors may already be holding a golden ticket.
Gold has delivered reliable returns when measured in Indian Rupees (INR) — even over long timeframes, which means it has consistently appreciated in value for Indian investors.
These INR returns have actually been better than gold's returns in U.S. Dollars (USD) — meaning, if you bought gold in India and held it over the long term, your gains would likely be higher than someone who bought the same gold in the U.S.
Why the difference? It's largely due to the depreciation of the rupee against the dollar. As the rupee weakens (which it has steadily over decades), the local price of gold in INR goes up, even if the international (USD) price stays flat or falls.
Implication for Indian investors: Gold not only acts as a hedge against inflation and economic shocks, but it also benefits from currency depreciation, making it a more rewarding asset for Indians over time.
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'Gold's history reveals its dual nature: an enduring store of value and a volatile investment prone to long drawdowns. in spite of its volatility in USD, Gold has been a relatively safer asset for Indian investors on account of the Rupee's depreciation versus the USD. While it won't generate cash flows or compound like equities over decades, its low correlation with other assets makes it invaluable for diversification. The best way to include gold in your portfolio is through systematic rebalancing—not as a reactionary move driven by FOMO but as part of a long-term strategy designed to weather market cycles," said Anoop Vijaykumar, Head of Research, Capitalmind Financial Services.
As per the study, gold is expected to approach $3,300 per ounce in 2025, driven by fears of slowing U.S. growth, geopolitical tensions, and rising fiscal deficits. This surge has coincided with a correction in equity markets, sparking renewed interest in gold as a portfolio diversifier.
Why 2025 Could Be Gold's Next Big Year
This year's rally toward $3,300/oz is fueled by a perfect storm:
Trade War Escalation: U.S. tariffs on Chinese imports hit 145%, with China retaliating at 125%. This reignited demand for gold as a safe-haven asset.
Yuan Weakness: A 19-month low against trade-weighted currencies triggered defensive gold buying by central banks and investors.
Equity Market Correction: Tumbling equity valuations have made gold a go-to diversifier.
Portfolios with just a 5–10% allocation to gold often achieve better risk-adjusted returns than equity-only portfolios.
Capitalmind tested a 50:50 portfolio split between gold and the Nifty 50, rebalanced annually. The result? It outperformed investments in either asset alone over more than 20 years — a surprising revelation given gold's reputation for underperformance versus equities.
This is a textbook example of the Lindy Effect, where strategies that survive over time are more likely to continue succeeding.
Historical Lessons: Gold's Whiplash Decades
Gold investors have experienced wild swings. In the 1970s, gold soared +1359%, only to languish with two decades of negative returns in USD. But INR investors were shielded. After the 1991 reforms liberalized India's economy and decontrolled the rupee, the stage was set for divergence.
From 1990–2002, gold in USD terms struggled, often posting negative five-year rolling returns. Yet INR returns stayed mostly positive, thanks to a steadily weakening rupee.
"As shown in above table, in early 1980, Investors inspired by the stellar returns of the 1970s (+1359%) would have faced two decades of negative returns. Whereas, in Early 2000, after dismissing gold during the poor-performing 1980s and 1990s, investors would have missed its massive rally in the 2000s (+293%)," noted the report.
Missed the 2000s? Y ou missed a +293% rally. That unpredictability is exactly why Capitalmind advocates systematic rebalancing, not emotion-driven decisions.
How about the Indian Investor in Gold?
The report highlights that it took only 8 INR to buy 1 USD in 1973, whereas by 2025 it will take more than 10 times that amount. The returns on gold in INR and USD were fairly similar up until 1990, largely due to India's capital controls and protectionist policies. However, the post-1991 reforms, including trade liberalization and currency decontrol, entrenched a more market-driven exchange rate.
This institutionalized the rupee's sensitivity to external shocks, sustaining the post-1990 divergence in gold returns. As mentioned below, the USD return on gold experienced negative movement between 1990 and 2002, while the INR return remained positive for the most part. On a five-year rolling return basis, the USD return on gold frequently slipped into negative territory, especially between 1990 and 2002. Whereas the five-year INR return mostly stayed positive and has remained ahead of the USD return for the majority of the period.
What should investors do?
A 5–10% allocation can dramatically improve your risk-adjusted returns. And for Indian investors, the rupee's long-term trajectory continues to enhance those gains.
So next time you consider where to park your long-term savings, remember: gold might not shine every year—but in INR, it never dims for long.