Gold outshines equity, other asset classes: ASSOCHAM

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Gold outshines equity, other asset classes: ASSOCHAM
Gold has witnessed a golden era in terms of return to investors, while the share market has given negative returns on investment in the last three years, an ASSOCHAM study has noted. 

Those who invested in gold during August-September in 2009 have seen their money grow more than double up to August-September this year, thanks largely to the yellow metal becoming the first choice for investors not only in India but all round the globe.

On the other hand, investors in the equity market have seen their wealth erode in the same period. The erosion has been seen more for the retail investors who generally invest in the small mid-cap stocks.

Property which is generally out of reach for the small investors, too has seen good returns but not as much as gold, which has outshone all other investment avenues when the global economy has been through tumultuous times.

Standard gold was selling at around Rs 15,000-15,500 per ten grams in India just about three years ago. Today it is well above Rs 32,000 per ten grams- giving more than double the returns on investment in three years.

The worst performer has been the equity market.  The high point of the benchmark Sensex in 2009-10 was 17,711. Today, it is trading in the same range. So, the investment in equity has not even given a simple bank interest rate equivalent and are negative in actual yield.

In fact, on a five-year horizon, the equity investors have lost significantly. The high point of Sensex in fiscal 2007-08 was 20873 whereas it is range-bound between 17,000-18,000 now.

"Net-net, gold has really outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays" ASSOCHAM Secretary General D S Rawat said.

Mr Rawat said whether it is local investor or global investors, they have all gone by the conventional wisdom of gold being the safest bet when there is uncertainty about all other investment avenues. 

"Thus, it will be wrong to blame Indian passions for gold, as if it is only this passion which led to a big yellow metal import of USD 60 billion in fiscal 2011-12.  There are global risk aversion factors at play," said ASSOCHAM Secretary General.
On the five- year horizon, gold has given even more handsome results to the investors. The precious metal was selling around Rs 9,500 per ten grams five years ago in September, 2007. So, the returns on this time horizon are about 350 per cent.

Its prices have seen a sharp rise even in the London Metal Exchange (LME). It was being traded in the range of USD 900-1000 per ounce in 2009 and now it is selling above USD 1700 ounce. 

The property prices, according to the ASSOCHAM study, have given average yield of 40-50 per cent on all-India basis. It is true that prices in some pockets of big cities like Delhi, Mumbai, Chennai, Gurgaon have doubled in the past three years. But these cases are far and few. There are also cases in cities like Hyderabad where the investors have not got the yield at simple interest rates in property.

"Net-net, gold has absolutely outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays" said Mr. Rawat.

Read more about: gold, investment
Story first published: Monday, September 24, 2012, 11:43 [IST]
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