Gold headed for hat-trick of Diwali wins over stocks in 2012

With Diwali round the corner, gold investors with their fat 15 per cent gain since last Diwali appear to be headed for a hat-trick of better returns than stock markets.

The returns from stock markets, as measured by its benchmark index Sensex, has been a fixed deposit-like gain of about 8.5 per cent for the same period.

With the precious metal rising from Rs 26,700 levels on last Diwali to Rs 30,700 at present, an investment of Rs 10 lakh has appreciated to close to Rs 11.50 lakh now.

The total gains by Diwali day next week could be even better as some experts predict that gold may breach its record price of over Rs 32,000 as demand outstrips supply on days of Dhanteras (November 12) and Diwali (November 13).

While stock markets have also given positive returns since last Diwali, the performance has not been as robust as the yellow metal.

The BSE benchmark Sensex has risen from near 17,300 levels to 18,755 since last Diwali -- resulting into an appreciation of Rs 10 lakh investment to close to Rs 10.85 lakh now.
While stocks are still looked upon as a risky asset despite attempts to inculcate an equity culture in the country, gold has always been an integral part for its use as gifts and auspicious purchase during festivals.

This will be the third instance in a row when the precious metal would outshine stock markets returns on year-on-year basis this Diwali, even as gold continues to be called an 'idle asset' for investment purposes.

While Sensex fell over 17 per cent in one-year period till last Diwali (in 2011), gold came to the rescue of hapless investors with a 36 per cent rally for the same period. Prior to that, the gold had delivered a stellar 24.5 per cent one-year gain on Diwali day in 2010 -- still better than a little over 21 per cent gain for the Sensex in the same time.

However, the stock market had outperformed gold on year-on-year basis on Diwali day in 2009, when the Sensex had seen a staggering 92 per cent rally in comparison to a relatively modest 34 per cent gain of the gold.

Prior to that the investors had lost over half of their stock market wealth between 2007 and 2008 Diwalis, while the safe-haven demand for gold had helped it notch up a 11 per cent positive return.

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