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Goals upto 80% faster?

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Can we beat inflation by investing in Gold?

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Can we beat inflation by investing in Gold?

May 10, 2023

5 Minutes

Can Gold Investments Beat Inflation? Unveiling 44 Years of Data Analysis

Investors often seek avenues that outpace inflation, considering assets like equity, real estate, and gold. In this exploration, we dive into historical data spanning from 1979 to 2023, comprising around 11,600 daily data points, to assess if gold has proven to be an inflation-beating investment over the long term.

Investing in Gold: A Historical Journey

Our focus is on understanding gold's performance, particularly its ability to beat inflation. Gold and real estate stand out as preferred assets among Indians, with the perception that their values seldom depreciate.

Analyzing the Journey: 1,00,000 INR in 1979

If someone invested Rs.1,00,000 in gold in 1979, the current value stands at Rs.89,24,859, resulting in a Compound Annual Growth Rate (CAGR) of approximately 10%. However, this journey is not without turbulence, emphasizing the importance of examining rolling returns.

1 Year Rolling Returns of Gold (1979-2023)

Volatility Range: Max Return - 249%, Min Return - (-34%), Average Return - 12%
Noteworthy: Almost 43% of 1-year returns are less than 6%, reflecting substantial volatility.

3 Year Rolling Returns of Gold (1979-2023)

Volatility Continues: Max Return - 36%, Min Return - (-10%), Average Return - 10%
Insight: About 35% of 3-year returns are below 6%, emphasizing the significance of medium-term holding.

5 Year Rolling Returns of Gold (1979-2023)

Persistent Volatility: Max Return - 28%, Min Return - (-10%), Average Return - 10%
Observation: Nearly 29.3% of 5-year returns fall below 6%, revealing sustained fluctuations.

10-Year Rolling Returns of Gold (1979-2023)

Extended Holding Period: Return Range - Max 21%, Min 0%, Average 10%
Notable: Around 20.5% of 10-year returns are below 6%, signaling challenges in consistently beating inflation.

Conclusion:

Navigating Gold's Volatility

After scrutinizing 44 years of data, the analysis indicates that, even with a 6% inflation rate, there's a 20% chance of not surpassing inflation over a 10-year period. For shorter durations like 5, 3, and 1 year, the probability of falling short in beating inflation increases significantly.

The belief that gold guarantees inflation-beating returns is dispelled by the observed volatility. If you still believe in gold's potential to outshine inflation, proceed with caution, considering the inherent unpredictability highlighted by the data.

Can Gold Investments Beat Inflation? Unveiling 44 Years of Data Analysis

Investing in Gold: A Historical Journey

Analyzing the Journey: 1,00,000 INR in 1979

1 Year Rolling Returns of Gold (1979-2023)

Volatility Range: Max Return - 249%, Min Return - (-34%), Average Return - 12%
Noteworthy: Almost 43% of 1-year returns are less than 6%, reflecting substantial volatility.

3 Year Rolling Returns of Gold (1979-2023)

Volatility Continues: Max Return - 36%, Min Return - (-10%), Average Return - 10%
Insight: About 35% of 3-year returns are below 6%, emphasizing the significance of medium-term holding.

5 Year Rolling Returns of Gold (1979-2023)

Persistent Volatility: Max Return - 28%, Min Return - (-10%), Average Return - 10%
Observation: Nearly 29.3% of 5-year returns fall below 6%, revealing sustained fluctuations.

10-Year Rolling Returns of Gold (1979-2023)

Extended Holding Period: Return Range - Max 21%, Min 0%, Average 10%
Notable: Around 20.5% of 10-year returns are below 6%, signaling challenges in consistently beating inflation.