How was gold when it was bought every year on Dhanteras?

Sleep Purchased on Dhanteras 10 years ago has given an annual return of 6.56% so far. This is higher than the annual increase of 5.6 per cent in the Cost Inflation Index (CII) over the last 10 years. CII indicates an increase in the cost of goods and assets due to inflation.

Although gold has managed to beat inflation over the past decade, it has paled in comparison to other asset classes. The BSE Sensex has risen nearly 13% since October 2021. However, it is worth noting that over the last 10 year period, gold bought between 2015 and 2020 has given double-digit returns. (see graphic). On the other hand, gold prices have remained stable over the past one year and have given negative returns.

HDFC Securities Senior Research Analyst Tapan Patel said the global economic recovery post-Covid-19 has led to a marginal correction in gold prices in the last one year. “Gold ETF inflows have also declined,” he said.

Nevertheless, financial planners advise against excess gold in one’s investment portfolio. It should only be included as a hedge against inflation and a cushion against market volatility. “There is empirical data to show that a weak economic outlook drives gold prices up and gold as an asset class does well when there is market volatility. Both the reasons explain the sharp rise in gold prices in 2020,” said Amit Suri, a Delhi-based financial planner.

“The past returns of gold will show that it gives sub-optimal returns which may not help in meeting the financial targets. In a few years it has given lesser returns than a bank savings account.”

If you buy gold every year around festivals as is the traditional practice, financial experts recommend limiting gold exposure to 10% of your investment portfolio.

For diversification purposes, you may consider investing in alternative products, such as gold exchange-traded funds (ETFs) and gold bonds in place of physical gold.

“Investors should move away from buying gold in the traditional way as jewelery and look at paper gold for investment purposes,” Suri said.