A surge in global market anxieties, driven by escalating trade wars, economic slowdowns, and currency fluctuations, has propelled gold prices to unprecedented heights. Brokerages like MOFSL are now predicting prices to reach an astonishing Rs 1.06 lakh per 10 grams, sparking a renewed interest in this precious metal.

However, gold has a paradoxical nature – it serves as a reliable store of value but is also an investment subject to significant volatility and extended drawdowns. Its price movements are often unpredictable, making it a challenging asset for investors to navigate.

The 1980s, for instance, were a particularly trying time for gold investors. Despite the stellar returns of the 1970s (up 1359 per cent), they had to endure two decades of negative returns, as highlighted by Capitalmind’s data.

• The 1980s were marked by a decline in gold prices, largely due to the high interest rates and inflationary pressures of the time.
• Despite this, gold investors in the 1970s experienced a remarkable 1359 per cent return, making it an attractive investment opportunity.

Anoop Vijaykumar, Head of Research at Capitalmind Financial Services, warned that investors would have missed out on the massive rally of the 2000s (up 293 per cent) if they had dismissed gold during the poor-performing 1980s and 1990s.

“Whereas, in early 2000, after dismissing gold during the poor-performing 1980s and 1990s, investors would have missed its massive rally in the 2000s. This unpredictability underscores why systematically rebalancing portfolios is critical,” Vijaykumar said.

He highlighted that despite its volatility in dollar terms, gold has been a relatively stable investment for Indian investors, largely due to the depreciation of the rupee against the dollar.

Vijaykumar further pointed out that since 1973, the value of the dollar has depreciated significantly, from Rs 8 to purchase one dollar to more than tenfold in 2025.

“Since 1973, when it took Rs 8 to purchase one dollar, the value has shifted dramatically. By 2025, the same dollar is expected to cost more than tenfold, reflecting significant currency devaluation over the decades,” Vijaykumar said.

The price divergence between gold in rupee and dollar terms became more pronounced after 1990, largely due to India’s capital controls and protectionist policies, which maintained a consistent exchange rate.

1. Historically, the returns on gold in both rupee and dollar terms were relatively similar up until 1990.
2. After 1991, with the introduction of trade liberalisation and currency decontrol, the dynamics of gold investments changed, particularly in how returns are perceived in different currencies.

“On a five-year rolling return basis, the dollar return on gold frequently slipped into negative territory, especially between 1990 and 2002. Whereas the five-year rupee return mostly stayed positive and has remained ahead of the USD return for the majority of the period,” Capitalmind said.

He also highlighted that gold has been a relatively stable investment for Indian investors, largely due to the depreciation of the rupee against the dollar.

“While it won’t generate cash flows or compound like equities over decades, its low correlation with other assets makes it invaluable for diversification.