Business

Published: Monday September 24, 2012 MYT 1:13:00 PM

Gold outshines equity, other asset class


NEW DELHI: Gold has witnessed a golden era in terms of returns to investors amid its skyrocketing prices as compared with the share market, which has given negative returns on investments in the last three years, a study revealed.

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

Investors in the equity market saw their wealth eroding in the same period. The erosion was more prevalent for retail investors, who generally invested in the small mid-cap stocks, said the Associated Chambers of Commerce and Industry of India based on a study conducted by the chambers.

The chambers said property, generally out of reach for small-time investors, saw good returns but not as much as gold, which has outshined all other investment avenues at a time when the global economy was going through tumultuous times.

Standard gold was selling at around Rs15,000-15,500 (RM855-RM884) per 10 grammes in India just about three years ago.

Today it is well above Rs32,000 (RM1,825) per 10 grammes, raking in more than double the returns on investment in three years.

The worst performer has been the equity market. The high point of the Bombay Stock Exchange's benchmark Sensitive Index in 2009/2010 was 17,711.

Today, it is trading at the same range.

"So, investments in equities have not even given a simple bank interest rate equivalent and are negative in actual yield," it said.

In fact, on a five-year horizon, investors in equities have lost significantly. The high point of Sensex in fiscal 2007/2008 was 20,873 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 uncertainties over the global economy stays," the chambers' Secretary-General, D S Rawat, said.

He said whether it was local investors or global investors, they have all gone by the conventional wisdom of gold being the safest bet when there were uncertainties about all other investment avenues.

"Thus, it will be wrong to blame Indian passions for gold, as if it is only this passion which has led to a big yellow metal import of US$60 billion (RM182 billion) in fiscal 2011/12.

"There are global risk aversion factors at play," said Rawat.

On the five-year horizon, gold has given even more handsome results to investors. The precious metal was selling around Rs9,500 (RM542) per 10 grammes five years ago in September 2007.

So, the returns on this time horizon are about 350 per cent.

The gold price saw a sharp rise even on the London Metal Exchange. It was traded in the range of US$900-US$1000 (RM2,725-RM3,028) per ounce in 2009 and now it is selling above US$1700 (RM5,148) an ounce.

Property prices, according to the chambers' study, have given an average yield of 40 to 50 per cent on all-India basis.

Although prices in some pockets of big cities like New Delhi, Mumbai, Chennai and Gurgaon have doubled over the past three years, these cases are far and few.

There are also cases in cities like Hyderabad where investors have not "harvest" the yield at simple interest rates in property, he said.

"Net-net, gold has absolutely outdone other asset classes and it is likely to remain an attractive bet as long as uncertainties over the global economy stays," he added. - BERNAMA

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