Gold vs. Market Performance in 2024: Expert Tips for Portfolio Adjustment

Gold and equities each have distinct characteristics, and the decision between the two is not about choosing one over the other but rather about strategically allocating to both to mitigate risk. Historically, both asset classes have delivered returns, but their performance cycles often vary, underscoring the importance of diversification for a balanced risk-return profile.

Data show that while Nifty has outperformed MCX gold over the last 20 years (12.7 percent vs 12.0 percent CAGR) and the past decade (12.8 percent vs 8.9 percent), gold has outpaced Nifty in the last five years, offering a 16.2 percent return compared to Nifty’s 14.0 percent. Gold’s resilience during market crises, such as the 2008 financial meltdown, emphasizes its value as a defensive asset during turbulent times.

Given the current market scenario, the key question arises: will gold outperform Nifty in 2024, and how should investors adjust their portfolios? Should one reduce equity exposure in favor of gold?

Ajit Mishra – SVP, Research, Religare Broking

Ajit Mishra emphasized that equities and gold have shown strong momentum in 2023, a trend likely to continue in 2024. The US Federal Reserve’s expected rate cut cycle could benefit both asset classes, providing a favorable environment for equities and gold alike. Mishra suggested that a balanced portfolio, incorporating equities, debt, and gold, aligned with risk tolerance, is essential. Gold can act as a hedge in uncertain times, making it a crucial part of any well-diversified portfolio.

Sujit Modi, CIO, Share.Market

Sujit Modi noted that while the Nifty 50 gained around 17 percent, gold has risen by approximately 16 percent on a rolling futures basis. The improved performance of gold this year can be largely attributed to global tensions, increased gold purchases by major central banks, and ongoing economic uncertainty. Long-term investors should focus on maintaining appropriate asset allocation rather than fixating on the outperformance of one asset class over another. A diversified approach with a balanced allocation to both gold and equities is advised.

Trivesh D, COO, Tradejini

Trivesh D highlighted that gold tends to perform well during periods of uncertainty, acting as a safe-haven asset. However, if global tensions stabilize, gold’s performance may be limited in the near term. Equities, on the other hand, benefit from economic growth and corporate performance, potentially leading Nifty to outperform. Maintaining a balanced allocation to both asset classes is crucial for most investors, with gold serving as a hedge and equities offering higher growth potential.

Aamir Makda, Commodity & Currency Analyst, Choice Equity Broking

Aamir Makda highlighted that the Federal Reserve’s monetary policy will play a critical role in shaping gold prices in 2024. Monitoring interest rate decisions closely is advised for investors to adjust their portfolios accordingly. He recommended maintaining a diversified portfolio with a suitable mix of gold and equities to navigate economic instability or geopolitical tensions successfully.

Shiwani Kumari, Analyst, Monarch Networth Capital

Shiwani Kumari pointed out that gold typically outperforms equities during periods of high inflation, geopolitical tension, and economic uncertainty. Global economic concerns could continue to support gold’s momentum in the near term. However, as the global economy recovers, equities, particularly Nifty, may see stronger returns. Kumari suggested a balanced allocation to both gold and equities, with gold providing protection in uncertain times and equities offering growth potential driven by India’s economic outlook and policy reforms.

The debate over whether gold will outperform Nifty in 2024 comes down to several factors, including economic growth, central bank policies, and geopolitical stability. While gold offers a hedge against uncertainty, equities remain a key driver of long-term growth. Experts recommend maintaining a well-diversified portfolio that balances both asset classes, with an allocation to gold that ranges between 5 percent to 15 percent, depending on individual risk tolerance and market conditions. By doing so, investors can ensure they are well-positioned to navigate both volatility and opportunity in the year ahead.