Gold prices recently reached unprecedented levels, hitting $5,417 per ounce and ₹1.75 lakh per 10 grams by late January. However, a subsequent correction reflected an approximate decline of 11% in dollar terms and 14% in rupee terms. This has not significantly changed the long-term outlook for gold. As Akshaya Tritiya approaches—a customary occasion for households to purchase gold as a symbol of wealth—hesitant investors may find this decline offers a more favorable entry point.
The macroeconomic factors driving interest in gold remain robust, including monetary debasement, geopolitical tensions, fiscal excess, systemic stress, and inflation concerns. For long-term investors, the recent decline appears to be a pause rather than a fundamental shift. While advocates for equities may recall the gold bear market of the 1980s, several compelling arguments suggest that such concerns are misplaced.
Firstly, the gold-to-S&P 500 ratio, which indicates how much one ounce of gold can purchase in S&P 500 shares, currently stands at approximately 0.7. This ratio implies that gold is relatively strong but not historically overvalued. Despite the current price of around $4,830 being higher compared to $3,300 a year prior or $2,400 two years ago, it is still markedly below the euphoric peaks observed in the 1970s when the ratio surged past 2.5 by late 1974 and reached 7.5-7.6 in January 1980. In contrast, during the significant equity boom post-2000 and the AI-driven surge in U.S. stocks in 2024, this ratio remained near 0.4-0.5, highlighting equities’ dominance over gold.
Secondly, the recent drop in gold prices does not mean the bullish case has collapsed. After reaching its peak on January 28, 2026, at $5,417, gold experienced a decline of up to 19.2% by March 26, before stabilizing to a 10.8% drop by April 17. While significant, gold has historically managed to recover from similar setbacks. For example, during the mid-1970s, gold’s price plummeted from $185 to $104—a drop exceeding 44%—but later surged to reach its 1980 peak. Current declines appear more akin to a typical correction within a sustained upward cycle.
Thirdly, the MCX gold-to-Nifty ratio is elevated, but the context is essential. When the ratio peaked at 6 in March 2009, the Nifty’s trailing P/E was only 9.2, indicating equities were quite inexpensive. Conversely, on January 29, 2026, the ratio hit 6.9, while the Nifty was trading at a P/E of 23.7, reflecting high valuations in equities that could limit their potential for significant gains compared to gold. As of April 17, the MCX gold-to-Nifty ratio remained around 6.2, reinforcing the impression that gold’s strength is not coincident with cheap equities.
Lastly, historical performance data indicate that Akshaya Tritiya buyers have little reason to dismiss gold in favor of equities. Since 2007, gold has delivered an average return of 15.9% over 20 comparable one-year holding periods, compared to the Nifty 50’s average of 11.8%. Gold experienced gains in 16 out of those 20 periods and exhibited stronger capital preservation in challenging years, where it fell only 11% at its worst compared to a 32% decline for the Nifty. Gold’s outperformance was particularly notable in turbulent years, with its price increasing from ₹9,372 per 10 grams to ₹1,51,097 over the same timeframe, representing a roughly 16-fold increase. Meanwhile, the Nifty 50 grew from 3,998 to 24,354, a more modest increase of just over six times.
Amid these dynamics, even traditionally conservative investors are becoming more bullish on gold. Renowned investor Ray Dalio advocates for a diversified portfolio that includes 10-15% in gold, exceeding the typical 7.5% allocation found in the widely referenced All Weather portfolio. Dalio asserts that gold holds unique value, as it is not a liability like financial assets.
