Diwali 2024: Gold prices jump 30%, Nifty 50 rises 26% in one year. Which asset is better for investing?

Gold vs stock market: As Diwali 2024 is fast approaching, investors are busy finding investment options to maximise the return on their money. As Gold has remained a traditional investment option, it would be interesting to know that in the last year, gold prices have ascended from ₹60,282 per 10 gm to ₹78,577 per 10 gm, recording over 30 per cent rise since Diwali 2023. Likewise, the Nifty 50 index has surged over 28 per cent. So, since Diwali 2023, both equity and Gold have delivered stellar returns to investors, making it tricky for fresh investors to make an investment decision in Diwali 2024.

According to market experts, both assets are expected to generate stellar returns. Geopolitical tension is expected to fuel gold prices, whereas easing monetary policy and the US presidential election are expected to bring inflows of FIIs into the Indian equity market. They said that a downturn in China is also expected to fuel the precious metal.

Triggers for gold price rally

On what fueled gold prices and the Nifty 50 index in the last one year, Sugandha Sachdeva, Founder of SS WealthStreet, said, "The ongoing geopolitical conflicts, particularly in the Middle East, along with the Federal Reserve's pivot toward monetary easing and the potential for future rate cuts, have bolstered Gold's safe-haven appeal. The tight US Presidential race is further heightening uncertainty in financial markets while ballooning US debt levels and geopolitical risks are pushing more investors toward Gold as a hedge. Additionally, central banks, especially in emerging markets, have been increasing their gold reserves, and ETF inflows have surged in the last couple of months, further strengthening demand."
 

Triggers for the Indian stock market

On what fueled Nifty 50 and other stock market indices, Sugandha Sachdeva said, "Nifty 50's strong performance this year can be attributed to multiple variables: sustained portfolio inflows, resilient domestic growth, strong retail participation, earnings growth, and robust consumption demand. India has been an attractive destination for foreign investors, thanks to its political stability, stable currency, and robust growth compared to other emerging markets. Additionally, optimism regarding the potential start of a monetary easing cycle in the US and the super-sized rate cut by the U.S. Fed in September fueled gains in global equities, including Nifty, pushing it to new highs."

Speaking on the outlook for the Indian stock market, an SS WealthStreet expert said, “Nifty 50 is experiencing a cyclical downtrend, driven by several external headwinds- continued foreign investor selling, muted earnings, and funds being redirected to China following their recent stimulus measures. This downtrend could continue into the next quarter, influenced by escalating geopolitical risks, global liquidity shifts and potential changes in U.S. economic policies post-presidential elections. However, after a time-wise and price-wise correction, domestic equities are expected to attract fresh buying interest. The global and domestic easing cycle is likely to persist through 2025, with the RBI also expected to cut rates, creating opportunities for a recovery in Nifty. Once geopolitical risks subside, foreign inflows into Indian equities could rise again, driving Nifty toward the 27,500 mark by Diwali 2025.”

Gold vs equity: Which is better?

On which asset to look at in Diwali 2024, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said, "Both assets are expected to generate whopping returns in the next year, but a timely profit-booking will be an important factor that would ensure maximum return on one's money. While easing monetary policy and geopolitical crisis would support gold price rally, clarity of the US economic policy would fuel equity markets. So, one must remain vigilant about these triggers while taking any position in Gold and equity."

Regarding the outlook of gold price, Sugandha Sachdeva said, "Gold's momentum is expected to persist into the first half of 2025, with prices potentially reaching ₹84,000 per 10 gm and $3,000 per ounce after a brief correction likely later in 2024. Profit-taking could, however, emerge by next Diwali, pulling prices back to the ₹74,000 to ₹72,000 per 10 gm range. However, the broader trend for Gold remains upward as global uncertainty, inflationary pressures, and central bank actions continue to support its rise."

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.