Gold’s Unique Movement Pattern
Gold often follows a distinct pattern when it starts to rise in price. Initially, there is an increase in the gold price itself—whether measured in dollars or rupees. This serves as the starting signal. Following this, gold typically outperforms bonds. In the final stage, it begins to outperform stocks. This pattern has been observed repeatedly in the past and appears to be occurring again now.
Source: IGWT
Understanding Gold vs. Stocks
Even when both stocks and gold are rising, it is possible for gold to perform better than stocks. This was the case between 2001 and 2011-2012. During those years, stock indexes like the Nifty increased, but gold significantly outperformed them. This indicates that gold provided higher returns than stocks during that period. However, in subsequent years, stocks outperformed gold, which slowed down. Currently, gold seems poised to once again surpass stocks in performance.
A Sign for the Future?
If history is a guide, we may be entering a new phase where gold performs better than stocks for several years. This trend began roughly 12 years ago and could continue for another 5 to 7 years. In the past, gold has moved in long cycles, such as during the 1970s and early 2000s. Therefore, holding some gold in your portfolio during such periods can be a wise decision.
Why Gold Allocation Matters
Even if your primary investments are in the stock market, it’s important to allocate a portion to gold as well. The main idea is to diversify your portfolio by including gold, which can help balance your risk. Gold often provides strong returns when stocks are underperforming, making it a valuable hedge in uncertain times.
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