Gold Outperforms Long-Term USD Returns in INR: Capitalmind
April 29th, 2025: According to a report from Capitalmind Financial Services Pvt. Ltd., looking at USD–INR comparison for Gold reveals that Gold has not had a negative decade in INR versus two decades of negative returns for the USD.
The study reveals that Gold has provided consistent positive returns over the long run in INR terms. These returns have not only been consistent but have also surpassed gold‘s long-run performance measured in USD terms, which is an added boon for Indian investors.
Anoop Vijaykumar, Head of Research, Capitalmind Financial Services Pvt Ltd, said, “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.”
As per the study, gold is expected to approach USD 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.
Key Drivers and Outlook
- Trade War Escalation: U.S. tariffs on Chinese goods (145%) and retaliatory Chinese tariffs (125%) fueled safe-haven demand. Analysts link a $800/oz price surge in 2024 to trade-related uncertainty.
- Currency Hedging: Yuan depreciation (19-month low vs trade partners’ currencies) accelerated gold buying.
Portfolios with just a 5–10% allocation to gold often achieve better risk-adjusted returns than equity-only portfolios.
According to Capitalmind Financial Services 50:50 portfolio of Gold and the Nifty 50, rebalanced annually, outperformed standalone investments in either asset over more than two decades. This counterintuitive result underscores the Lindy Effect in action—where longevity and resilience in systems or strategies increase their likelihood of enduring success.
Decadal Returns: The Rollercoaster Ride
As shown in below 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%). This unpredictability underscores why systematically rebalancing portfolios is critical.
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.
