Till recently, geopolitical tensions, fluctuations in the dollar, and instability in equity markets consistently drove gold prices upward, peaking at $5,417 an ounce and ₹1.75 lakh per 10 grams by the end of January 2026. The subsequent correction—approximately 11% in dollar terms and 14% in rupee terms—has not significantly altered the long-term investment case for gold.
This downturn provides hesitant investors an opportune entry point this Akshaya Tritiya, a traditional occasion for purchasing gold as a symbol of prosperity. The macroeconomic factors underpinning gold’s value—monetary debasement, geopolitical instability, fiscal excess, systemic stress, and inflation risks—remain firmly in place. For long-term investors, this decline appears more as a pause than a reversal of trend. Despite reminders from gold bears and equity permabulls concerning past gold bear markets, there are four reasons why such fears are misaligned with the current fundamentals.
First, the gold-to-S&P 500 ratio—indicating how much of the S&P 500 one ounce of gold can purchase—suggests that gold is strong yet not historically oversubscribed. Currently at approximately 0.7, this ratio indicates that while gold prices at $4,830 seem expensive compared to earlier levels of $3,300 last year or $2,400 two years ago, gold still hasn’t reached euphoric extremes witnessed during inflationary periods. In the inflation-driven 1970s, this ratio peaked above 2.5 by the end of 1974 and surged to 7.5-7.6 in January 1980. In contrast, during the post-2000 equity boom and even more recently amid the AI-led US stock surge in 2024, the ratio mostly hovered between 0.4-0.5, demonstrating the dominance of equities over gold.
Secondly, the recent decline in gold prices does not indicate a broken bull market. From the peak of $5,417 on January 28, 2026, gold experienced a downturn of up to 19.2% by March 26, which was later reduced to about 10.8% by April 17. Such sharp declines are not unusual for gold. Historical data from previous bull phases shows that drawdowns of 5.4% in June 2024 and 7.3% in December 2024 did not derail the upward trajectory. Looking back to the mid-1970s, gold plummeted more than 44% from $185 to $104 but subsequently reached its peak in 1980. By this measure, the current downturn appears more like a correction within an ongoing cycle.
Third, the MCX gold-to-Nifty ratio stands at elevated levels, although the prevailing equity backdrop differs dramatically from past scenarios. In March 2009, the ratio reached 6 while the Nifty’s trailing P/E stood at a mere 9.2 times; similarly, in August/September 2013, the ratio peaked at 6.1 with the Nifty P/E around 14.2 times. Currently, as of January 29, 2026, this ratio hit 6.9 while the Nifty trades at 23.7 times trailing earnings, suggesting that gold is not coinciding with undervalued equities, casting further doubt on a significant pivot back to stocks.
Lastly, historical performance indicates little reason for Akshaya Tritiya buyers to regard gold as a lesser option than equities. Since 2007, across 20 comparable one-year holding periods, gold has shown an average return of 15.9% compared to the Nifty 50’s 11.8%. In 16 of these 20 periods, gold posted gains, outperforming the Nifty’s 15 gains. More critically, gold maintained better capital preservation during challenging economic conditions, with its worst drop being 11%, versus a 32% decline for the Nifty. While equities often excel in bullish phases, gold’s advantages shine through in times of turmoil. Over a long-term view, gold prices have risen from ₹9,372 per 10 grams to ₹1,51,097—a growth of roughly 16 times—compared to the Nifty 50’s rise from 3,998 to 24,354, approximately sixfold.
In light of these factors, even traditionally balanced investors are becoming more optimistic about gold. Veteran investor Ray Dalio has suggested that a well-diversified portfolio should allocate approximately 10-15% to gold, a higher allocation than the 7.5% typically cited in the classic All Weather portfolio. He emphasizes gold’s uniqueness due to the fact that it is not a liability of any other entity.
Published on April 18, 2026.
