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8 graphs on gold price movements (86 years data)

by Manish Chauhan · 153 comments

Today I want to show you some patterns of gold prices from last few decades. There is no interpretation or conclusion but some findings and observations on gold price fluctuations in India. From last 10 yrs gold has been on a bull run and prices have multiplied many folds. In the last couple of weeks, gold prices have been extremely volatile and some analysts also predict that gold price upside movement is in threat. So I found gold prices for last 86 yrs (1925 – 2011) and did some number crunching and some graphs from which we get some interesting findings.

Gold Historical Prices

4 yrs Gold Price difference (absolute returns

I found out the price difference for every 4 yrs period i.e. from 1928 to 1925 (yrs) and saw what exactly was the difference in the prices, then 1929 – 1926 and so on… till 2007-2011. Just to give you an idea, gold price in 2008 was 12,500 and in 2011 it was 26,400; so the price difference was 111.20%. I used these data to plot a running 4 yrs price difference so at any point of time you can see how much was the return in those 4 yrs prior to that point. Note that this change in absolute in difference.  The major point to note is that majority people think that gold has performed outstanding post 2000 in a time frame of 4 yrs. But from the graph you can see that in 70’s time the 4 yrs period return was much more than what investors saw in recent time.

 

Gold Historical Prices

8 yrs Absolute Price difference runnin

This one is just like above chart, but this time its 8 yrs price difference. We are trying to catch that was the price change in an 8 yrs period. So for example, price in year 1980 was Rs 1330, then after 8 yrs – in 1987, the price was Rs 2570, which is a 93.23%… So like this I calculated the price difference for all the 8 yrs period and graphed it. There are very less 8 yr holding period when the returns from gold was negative, that happened 50’s and 60’s and just 90’s end.

Gold Historical Prices

4 yrs CAGR running

The next chart is the CAGR return chart for 4 yrs time frame and the graph is for running periods… that means 1925-1928, 1926-1929… 2008-2011. CAGR return is the main indicator of the performance of any instrument. If you look at the chart below you can see the ups and downs in gold performance and you can see how gold has performed in short run (4 yrs period) for a long time line. You can see that gold returns touched 20%-25% in 70’s and even in recent time it has performed wonderfully… which we all are aware of :).

Gold Historical Prices

8 yrs CAGR running

Then you can see the graph below which shows CAGR return on 8 yr running period. The interesting a little obvious fact is that it hardly gave any negative return in any 8 yrs time frame, only during 50’s and late 90’s it has performed badly.

Gold Historical Prices

20 yrs CAGR running

The real test of gold comes from a very long term performance and if we see a 20 yrs CAGR return on rolling basis (1925 – 1944, 1926-1945… 1992-2011), then you can see that most of the times the returns has been in the range of 5-10% and only in the 80’s people got best return if they had bought it in 60’s.

Gold Historical Prices

CAGR from 1926 (base year)

This chart is interesting; it calculates the CAGR return of GOLD from 1926 to all the years. I mean CAGR return from 1925- 1926, 1925-1927, 1925-1928 and then 1925-2011… So the base year is always 1925. This shows you what was the very long term CAGR return of gold considering it was bought in 1925. In a way this does not give us very strong conclusion, but still shows us some perspective.

Gold Historical Prices

CAGR from 1960 (base year)

This graph is same as above just that the base year taken was 1960 so considering gold was bought in 1960, the graph shows the CAGR return for different holding periods. You can see that apart from those who sold the gold in 80’s realised the best CAGR return, but those who held it for long, still have the returns in range of below 10%.

Gold Historical Prices

CAGR from 1980 (base year)

The last chart I want to show is with base year of 1980, you can see that over the long term the returns have converged to 10% & only in the last 10 yrs you can see the returns again going up.

Gold Historical Prices
What are your conclusions based on these charts ? What do you think about gold price movement from this point onwards ?

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{ 151 comments… read them below or add one }

1 Dharmesh January 25, 2012 at 9:12 am

Hi Manish,
A very nice article as usual. You seem to have done a lot of homework for this.
I think, the charts only suggest one thing, there is still some steam left in Gold at the current levels. I am bullish on gold. Moreover, I believe, one need to have atleast 8-10% gold in his portfolio; and any time is the right time to buy gold, as long as you buy it.

-Dharmesh

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2 Manish Chauhan January 26, 2012 at 5:04 pm

Dharmesh

Thats your call , i would persoanlly stay away from gold at current levels

Manish

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3 baseer October 25, 2012 at 1:35 pm

hi, in this comment you have written that you will stay away from gold at current levels but two comments down when someone asked your advice you gave them advice to buy physical gold, it is confusing can you please state in common mans terms “Is it ok to buy gold or not if yes than when if not then when’

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4 Manish Chauhan October 27, 2012 at 12:06 pm

It depends on the commentator and in what context its written , If you are looking at it purely from return point of view, truely speaking no one can predict it.

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5 Reema January 25, 2012 at 9:53 am

My conclusion is this: I should not shy away from selling some portion of gold when in need of cash for a goal/emergency. But the current mindset is to always sell equity first and keep the gold for generations — till you are great grandparents. In other words, try to cultivate some love for your well performing funds, just like gold.

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6 Manish Chauhan January 26, 2012 at 5:03 pm

Reema

Yea .. i agree to that view

Manish

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7 KISALAY January 25, 2012 at 10:01 am

Dear Manish,
I very happy to get these article for gold.I also interested in investing in Gold but don’t know which time is best for investment & in which mode.So, you can give any advice for it .I want also to maintain 10% in portfolio.

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8 Manish Chauhan January 26, 2012 at 5:02 pm

Kisalay

You can invest in physical gold , gold bars , gold ETF

Manish

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9 R>Chandrasekaran January 25, 2012 at 10:27 am

Dear Manish,
This is amazing!! So much of gold movement data is a wonderful treasure for a person who is really interested in investing gold. Great!!!
Once again thank you for all your information.(iam simply a reader)

with Regards
Chandrasekaran

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10 Manish Chauhan January 26, 2012 at 5:01 pm

Thanks Chanrasekran

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11 Sachin January 25, 2012 at 10:50 am

thanks Manish, very nice info shared..

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12 Rohit Verma January 25, 2012 at 11:36 am

Dear Manish,

Fantastic article. I appreciate your efforts in doing a thorough analysis of the gold prices over the decades. I need your expert advise whether is this the right time to buy gold ??

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13 Manish Chauhan January 26, 2012 at 4:58 pm

Rohit

I cant advice on that .. Over the long term we have seen that gold returns are in range of 5-12% .. over a short term its only speculation

Manish

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14 Abhishek Chanda January 25, 2012 at 11:44 am

Mind blowing analysis…very useful!

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15 Jerry Jose January 25, 2012 at 2:47 pm

Yes you done well. Thanks for the articles. last years it shows a jump in gold prices and it gives a doubt that there may a correction also in this year or coming year.

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16 Manish Chauhan January 26, 2012 at 4:52 pm

Jerry

Yea but those kind of jumps keep happening , and you cant really take them as basis for decision like selling ..

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17 TWINKLE January 25, 2012 at 3:00 pm

hi manish
awesome blog….

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18 Manish Chauhan January 26, 2012 at 4:51 pm

Thanks :)

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19 Hitesh January 25, 2012 at 3:30 pm

Hi Manish,

A very very infomative article.

Hitesh

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20 Manish Chauhan January 26, 2012 at 4:45 pm

Good to know you liked it .. what are the key learnings you took ?

Manish

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21 Jitendra Solanki January 25, 2012 at 3:36 pm

Hi Manish,

Very nice information you have shared. I personally believe that one should expect a reasonable return of 9-10% when you are holding it for long term.In shorter term you can see the other side also and hence it is more of speculation. The problem is that seeing the short term performance, investor starts considering it for long term holding.

The asset is good when you buy it for the real consumption but should not be looked as an investment product for higher returns.

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22 Manish Chauhan January 26, 2012 at 4:43 pm

Yea Jitendra

Agree with your points .. Over a long term one should not expect a lot of REAL return from gold as investments

Manish

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23 Ketan Tapar January 25, 2012 at 3:48 pm

My conclusion is that gold never give you long term return on your investment more than inflation rate. Manish, why dont you comper the return of gold against inflation so that it will give us clear picture of our investment in gold.

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24 Manish Chauhan January 26, 2012 at 4:39 pm

Ketan

thats a good point .. I have no idea where to find the inflation data for very long term .. Any idea where can we find it ?

Manish

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25 Chintan Jariwala February 17, 2012 at 5:53 pm

Dear Manish,

Indeed the article was great.
For the inflation data, you can have a look at http://www.tradingeconomics.com/india/inflation-cpi.

Chintan

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26 Manish Chauhan February 17, 2012 at 5:56 pm

But that does not allow to export the numbers in excel for FREE .

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27 Chintan Jariwala March 28, 2012 at 4:39 pm

Dear Manish,

I will recommend to compare it with CPI ( Consumer Price Index ) instead of inflation.

Have a look at this link,
http://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=Handbook%20of%20Statistics%20on%20Indian%20Economy

OR

Check, “data.worldbank.org/indicator/FP.CPI.TOTL.ZG”

This data may prove useful for you, in this article & future ones.

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28 Manish Chauhan March 28, 2012 at 5:15 pm

Thanks for that data .. will look at it !

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29 Chandrashekhar January 25, 2012 at 4:01 pm

Thanks for giving the detailed graphic explanation.
We can see from the grapf that sinces 2001 till date the prices are rised steadily up to 2006 but afterwords increased considerably.
Why this has happened is it due to depriciation of Rupee or otherwise.
Chandrashekhar

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30 Manish Chauhan January 26, 2012 at 4:33 pm

Chandrashekhar

It depends on so many things .. its all about how stocks are doing and how different economies are doing because gold is considered as safe heaven and most of the people flock to gold when they cant decide on anything else

Manish

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31 Paresh January 25, 2012 at 4:16 pm

One query,prices shown in first table are average for that year or picked for a particular date?Sorry if you have already mentioned it and I do not catch it.

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32 Manish Chauhan January 26, 2012 at 4:28 pm

Paresh

THe prices must be average . I got this data from net , so it was not known

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33 Paresh January 25, 2012 at 5:50 pm

Just I forget to mention one more thing in above comment.

It would have been better if analysis have done based on dollar terms than indian rupees.In 1980,after sharp spike,Gold prices in international markets were nearly halved afterwords which do not reflctet here.

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34 Gazala January 25, 2012 at 6:49 pm

Hi Manish,

Do you suggest investing in gold 1gm per month as i have been doing it since 2009. I purchase hard gold. Planning to carry on for a long term investing this way. what do you suggest ?

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35 Manish Chauhan January 25, 2012 at 7:14 pm

Gazala

No harm in investing in gold , it will keep your money diversified .. but make sure your expectations should not cross 10-12% in long run , anything extra than that will be bonus. The volatility in gold prices also one of the things you will have to live with .

Manish

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36 kc January 25, 2012 at 7:28 pm

hi manish
nice information,from graphs my conclusion is in long term gold gives return around 9-10%,current trend would be, after slightly increase, decrease.wat do uthink

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37 Manish Chauhan January 25, 2012 at 7:34 pm

KC

Yea .. thats the conclusion .. but thats a very long term returs , over a period of 10 yrs , you can see different kind of returns like 5% , 10% or even 15% .. So how much you get it dependent on timing .. given the bull run in last 10 yrs , I see next 10 yrs very normal , so not excited too much on gold for next 5-10 yrs

Manish

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38 Rakesh January 25, 2012 at 10:49 pm

Manish,

Very good analysis. I never understood Gold, so never invested in gold ETF’s.
Happy with gold in physical form.

Rakesh

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39 Manish Chauhan January 26, 2012 at 2:17 pm

Rakesh

Gold in physical form is good enough .. no need to invest in Gold ETF if you are not comfortable

Manish

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40 bemoneyaware January 26, 2012 at 4:02 am

What a mind-boggling article! It reminds me of the quotes:
Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. ~Aaron Levenstein and
I abhor averages. I like the individual case. A man may have six meals one day and none the next, making an average of three meals per day, but that is not a good way to live. ~Louis D. Brandeis
I am confused as to a) which base year should we take? b) What are the reasons that price of gold rose from 1968-1988? and again after 2002?

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41 nandish January 26, 2012 at 11:08 am

Kirti i loved what aaron levenstein said.

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42 Manish Chauhan January 26, 2012 at 1:41 pm

Bemoneyaware

Good quote :) .. Gold prices saw huge movement in international markets during 70’s .. which also moved the prices in India too .. while we cant pin point just one reason , its all about demand , supply , emotions, stock markets , overall world economy and then the cycles around business and economy .. its not easy to judge the price movement reasons like that :)

What do you say ?

Manish

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43 Veerchand Bothra January 26, 2012 at 8:11 pm

CAGR of 10% doubles the price in roughly 7 years.

Gold has given a CAGR of 10% between a long period of 86 years, which is not a small return.

Without inflation data at hand, it looks like Gold has indeed kept pace with inflation in these 86 years.

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44 Manish Chauhan January 28, 2012 at 12:23 pm

Veerchand

THe long term CAGR for gold from 1925 is around 8% , not 10% .. and yes gold is known to keep its purchasing power and keep pace with inflation

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45 Ankur Lakhia January 26, 2012 at 11:40 pm

Manish,

I understand that Gold retains its purchasing power over a long period of time. This means that real, inflation adjusted, returns from Gold would be close to zero over a long period of time. Your data looks like it is confirming this theory.

This also means that Gold should not be viewed as investment (something which gives good real return over a long period of time) but should be viewed as insurance (something which protects its purchasing power over a long period of time).

Think of a country like Zimbabwe where inflaion was beyond control or a country like Pakistan where inflation is very high double digits since long time or a country like Libya which is in chaos and there is no sanctity of local currency. It is hard for any domestic asset like stocks or property to produce real returns when inflation is running at, say 20% plus level for many years. In times like this, Gold shines.

Therefore, Gold should be bought on SIP basis to make it about 10% of networth, in my opinion, irrespective of its price. If, God forbid, India heads to Zimbabwe way or even remotely close to it, this 10% allocation to Gold can make difference of life & death, financially.

If you think India can never be like Zimbabwe, I wish you good luck. We have just embarked on biggest welfare scheme in India’s history by making it constitutional right for 65% population to get food grains from Rs 1/- to Rs. 3/- per kg forever. (Please remember, this Rs. 1/- or Rs/ 3/- per kg price can not be changed anytime in future, inflation in food price notwithstanding). This will only lead to spiral of money printing and high inflation over the years. We even do not know what else will come in future – may be free healthcare to 65% of population?

Basically what I mean to say is this – in all financial planning, normally all focus is on domestic assets denominated in rupee. No one thinks of scenario of what if currency goes for a toss like Zimbabwe or Soviet union? I do not think financial planning is complete without safeguarding purchasing power of your networth against rackless political schemes. If India does well, your 90% of assets (other than Gold) would do well and you need not worry. If India goes to hell, your 10% allocation to Gold will feel like heaven.

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46 Manish Chauhan January 28, 2012 at 12:13 pm

Ankur

Yea i agree to your points , where did I say that India can not go Zimbabwe way ? I agree to what you say .. but also look at how good the chances are for that in near future .. we can take those assumptions and plan things right now , I feel that would be being too cautious , dont you think so ?

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47 Ankur Lakhia January 28, 2012 at 1:29 pm

Manish,

As I said, I consider Gold as an insurance for networth against unforseen kind of events, Black Swans so to speak. In another words, Gold is similar to networth as life insurance is to death. These events, be it huper-inflation or India – Pakistan war or rapid rupee depreciation etc will always have very low probabilities in near future, just like my death is. However, as time to take out insurance is when you don’t seem to need it, time to buy Gold is when you don’t seem to need it.

Besides, I am advocating not more than 10% as allocation to Gold. If the need for this insurance doe not arise then it is fantastic for remaining 90% allocation. It will not matter if 10% allocation to Gold returns only 5% in nominal terms beccause, in such cases, remaining 90% would have erpformed well.

Hence, I consider regular buying of Gold up to 10% of netwroth is low cost insurance for a lifetime’s hard work and prudent financial decisions.

What is your view regarding buying of Gold on SIP basis, to a limit of 10% of networth?

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48 Manish Chauhan January 29, 2012 at 2:43 pm

Yea .. i agree that upto 10% of allocation is something a common person should look at. However given today’s times where gold movement heavily depends on emotional factors and economic situations where the volatilty can be high , a person who wants to speculate and is ready to take the risk of price movements can look for higher allocation also

Manish

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49 amit April 30, 2012 at 4:59 pm

How companies apparently with good prospect are NOT really good and you stay away from them —
http://amitkumarblog.wordpress.com/2011/12/26/dish-tv-india-analysis-bright-future/
the above is perfect eg of ways in which ppl fool general public and even professionals investors into buying a hyped up stock rather than gold

Here is some data for last 15 years on returns of gold , equity from morgan stanley http://xa.yimg.com/kq/groups/6548896/1091899790/name/Morgan

Gold — 12.7 %
Equity (Sensex) — 13.2 % . 15 yrs is a long period pls.
But that is not just about a 0.5% difference in returns but how many times the prices of gold went down or crashed or were volatile (if you are MBA types taught in B-Schools that volatility is risk which is crap) .
Gold Volatility has been 12.8% and equities 40% . Almost all of gold volatility has been on the up while everyone remembers 2008 when sensex crashed almost 50% + within 6-8 months .
Some intelligent soul will say well you should have bought then . Oh yes had investing been so easy that people would have picked up sensex at 8000 in 2009 then most would have become warren buffet (or on way to become him) .
How many have the guts and intelligence to see their stocks go down 60% from top tick to bottom tick n hold on ??? How many actually buy low and sell high ??
Gold on the other hand almost always keeps going up slowly n surely . MBA guys will say volatility as a measure or risk which is crap . Risk is permanent loss of capital over a extended time period of time . Gold has never done that . Equities do it so frequently that I better not go into that .

And if someone is soo controlled that no matter what happens he will only invest in SENSEX and not use his brain (n easy earned money ) to start picking up stocks then of course he will make money more than gold .

I mean most common investors will get into equity game only when sensex has gone up 30% + in last 1 yr or two and get sucked into buying individual stocks apart from MFs . Because nothing dulls anyone’s intelligence than easy money . Then people start to buy DLF , Unitech Lanco Punj LLyod etc who are touted by everybody on TV in 2007 for wonderful opportunities .

Unfortunately the volatility there is not just volatility but its permanent loss of capital FOREVER . Understand difference . Any stock which goes down by 70-80% NEVER recovers . And most purchases in bull market by normal people occur on these very stocks .

But this is never case with gold .
Again I say – if your emotionally strong that even after you have doubled your money by putting them in MF/Sensex in two years (aka 2005-07) and you refuse to start picking stocks yourself then you need NOT READ anything about investing anywhere . I bet less tha .99% ppl can resist temptation to pick up individual stocks …

The point I am trying to drill down is this — so many guys are ready to fool you (read corporates , brokers) to give them the money because thats where their incentives lie .They wont get their bonus if they dont make you buy sell securities . Look at how MF sales have nose dived because commission has been reduced . WHy ?? Simple they were selling coz they will get commissions .
If they sell you gold they wont .

Hence every single guy worth his MBA and excel sheet mentality will say here is next 10 yrs of cash flow of xyz company with value this and buy stock . But when it comes to gold they wlll say put only 10% into that .
Why ??
Coz it gave almost exactly equivalent results of equity over 15 years or 20 years with less than 1/3rd of volatility ??????
10% come again ??? :-)

Really only 10% to gold . ??
How many of guys writing posts here bought more in early 2009 than sell ???
I challenge anybody who says gold to be only 10% of portfolio to show their DEMAT account transactions as to whether they were buying or selling equities during dark days of 2008-09 ????

Most people do NOT understand that gold is a way to protect yourself from Govt printing of money . Gold has held its value over last 5000+ years of civilizations .

Every single guy who has commented on this post has said same thing — pls limit gold investment to 10%-15% of your investible amount .

If you look at the above returns you see a 0.5% of difference in the returns of last 15 years . But then you say put only 10% of your networth in gold . Why ??
For all those guys who are jumping because some one said equities give fantastic inflation adjusted returns have a look at this —
http://capitalmind.in/2012/04/chart-the-great-indian-stock-market-story-was-only-5-good-years/

If you are good enough to enter in 2003 and exit in 2008 please send your resume to buffett . He is looking for investment managers .
You say gold as a insurance ??? and not investment .
How many of you guys slept soundly in September -August 2008 ??? Unitech halved in less than 2 weeks . Did you held on to the 2nd largest real estate player ??? u r down 80+% .
Oh you were intelligent to put your money in ITC , HDFC n TCS . Great .. Put all your money in picking up those stocks …n best of luck

For other mortals dont say put only 10% in gold which has given equal returns to investors with not a day where you feel pressurized or no sleep at night because what some bloody americans did in their country and a crash in Sensex ensues.

Please say this put SIP in gold but you can put 33% each in Gold , MFs (strictly MFs n NO individual stock picking) and Bonds .
10 yrs from now if this blog remains I will be happy to eat my words.

I am sure the intelligent mortals saying 10% gold in networth will still be saying that .

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50 munna November 16, 2012 at 9:20 pm

Huh. I am still not convinced!

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51 Manish Chauhan November 20, 2012 at 4:24 pm

There is nothing to convince here, its just some graphs where you need to take your learnigns yourself !

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52 munna November 20, 2012 at 11:20 pm

Manish, my comment was for Amit’s reply. Not yours! :)

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53 Manish Chauhan November 20, 2012 at 11:32 pm

ok:) .. Mis understood :)

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54 rohit July 28, 2012 at 12:12 am

very conceptual….. this has changed the way i think….

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55 Rajiv January 27, 2012 at 7:41 am

Hi Manish,
Thanks for your good info.
Since 2004 I am regularly purchasing 1 gm gold in physical mode on each month.There are no lapses.Can I conti this for another 10 years?I have kept record of my all purchase.I dont want Gold in paper form.Thanks.

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56 Manish Chauhan January 28, 2012 at 12:10 pm

Rajiv

Yea you can do that ..

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57 Saurav Sinha January 28, 2012 at 1:36 am

Great article as usual Manish ….
But what if Gold meets the fate of Aluminium which, back in 1800’s was considered a status symbol, costlier than Gold. Napoleon III, Emperor of France, is reputed to have given a banquet where the most honoured guests were given aluminium utensils, while the others made do with gold.

But one gentleman from Russia found out the cheap process of refining Aluminium which is known as Bayer Process which led to a massive fall in the price & stature of this metal.
I fear if that happens to Gold, where will all the investors specially nations fall to?

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58 Manish Chauhan January 28, 2012 at 9:34 am

Saurav

What are the chances of that happening :) .. Its so low that I personally would not consider that to decide anything on gold :)

Manish

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59 K.M.Manohar Kumar January 28, 2012 at 12:49 pm

Hi Manish,

A considerable amount of research and data collection would have gone into computing the above figures and graphs. An excellent work that provides comprehensive data for gold lovers/investors. Personally, I have never been interested in gold. After looking at the figures you have provided, my guess is that gold prices will drop during 2012 and 2013. Depending on how much it drops, the end of 2013 and/or the beginning of 2014 may provide good buying opportunities. It is only a guess.

Regards.
Manohar.

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60 Manish Chauhan January 29, 2012 at 2:50 pm

Manohar

Thanks for your appreciation.. Good to hear your views on gold in 2012 and 2013 , I slightly agree with it , but dont want to comment on price movements in short term at all :)

Manish

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61 Deepak R Khemani January 28, 2012 at 9:13 pm

Manish there is a very interesting point to note over here which I think not many people including you have noticed. GOLD in 1979 was 937 and in 2011 was 26,400 roughly 26 times. The SENSEX in 1979 was 100 and in beginning of 2011 was around 20,000/= ie 200 times!

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62 Manish Chauhan January 29, 2012 at 2:31 pm

Deepak

Yea i didnt look at that point , but its very known fact that over long term gold would have delivered just inflation linked return where as equity has given far better return .

Manish

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63 ashish January 29, 2012 at 5:22 pm

gold’s shine is forever. we will see more increase in gold price if we see more debt problem in US.
Gold is the safest bet and can be purchased at current level 25-26k (for 22k gold)

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64 Manish Chauhan January 31, 2012 at 4:48 pm

Ashish

what is your justification ?

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65 Keerthi Mukhi January 30, 2012 at 10:05 pm

Interested in your suggestion Manish San.

Say if I have 200 gm of Gold Coins (100 gm bought in 2007 & 100 gm bought in 2010) , is it wise to sell it *now* and book profits?

What is your opinion Manish?

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66 Manish Chauhan January 30, 2012 at 11:26 pm

Keerthi

Wrong question .. the answer would only depend on how you think about it , not me .. I am not a great follower of gold and I believe in taking the profits out .. so I would sell. but you might not think like that and you should not be .. Take your own decisions .

Manish

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67 Banyan Financial Advisors January 31, 2012 at 6:03 pm

Hi Manish,
I think you have provided a very valuable insight upon the movement of gold prices in past 4-8 decades. I think the primary reason behind the consistent movement in the gold prices has been a very limited stock of GOLD commodity on planet earth. It may surprise people, but a very common fact is that the total gold ever mined is 165000 tonnes out of which over 25% is owned / bought by India. To give it a perspective, the total global production for Iron in 2010 alone has been around 2,400,000,000 tonne (around 14500 times more than gold). The wealthier we all are becoming these days, the more will be the demand for Gold and hence it would push up the prices. Adding fuel to the fire is high liquidity in the hands of Investment Banks all across the world. Probably if I have free unlimited source of money, I shall continously buy Gold in large quantity (blaming uncertainity around the globe) – this would push up the gold prices. I would then ask my Gold analyst as well to say that Gold is going to go higher and higher so that every one also jumps upon the frenzy to buy Gold. AND when the time is right, I shall slowly start exiting Gold and make a killing – this would be slump of Gold for a couple of years atleast.

Hence, though bullish on gold from a long term perspective, I tend to be a bit cautious as well considering what is happening in the global markets.

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68 Manish Chauhan February 2, 2012 at 4:30 pm

Thanks for your views on gold .

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69 Pankaj February 1, 2012 at 1:47 am

Hi Manish,

Really appreciate your great efforts towards coming out with such wonderful graphs and data. You changed my views , I used to think Golds are really good for long term investment (At least that’s what i have heard from many people)…..But after seeing above data…..i see better options…..Special Thanks to Manish…..:)

Few Queries.

1). The CAGR has been mostly around 8 to 10% which is not so good enough to woe a investor (since inflation was nearly 7% in last 30 years or so) ……….
Do you agree?

2). Rather One should invest in PPF if not in Equity SIP, bcoz PPF will give atleast 7% guaranteed (Though at present it is somewhere around 8.5%) …..Wats your views on the same…..??????

In the above conditions , I have not considered disastrous situation like that of Zimbabwe (Inflation rate at 12530% ………:(:(…)

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70 Manish Chauhan February 2, 2012 at 3:38 pm

Yea from gold one shouod not expect more than 8-10% in long run (better to say inflation linked) .. So if you are investing in GOLD for growth of your money , I would say think again

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71 B.Murali Mohan February 1, 2012 at 6:00 pm

Thanks Manish for informing us the data in detail.

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72 Anubhav February 2, 2012 at 8:54 am

Hi Manish,

Gold still is the safest investement considering the fact that most of the people around the world use/sell first:-

1. Cash,
2. Equities
3. Mutual Funds/other financial investment
4. Fixed Deposits
5. Then gold.
in case of need/urgency.

World simply consider gold to be the safest among any othe commodity/equities/financial instrument. Your comparison for last 86 years though nice but doesnt looks decisive to me because this feeling of safety regarding gold has risen tremendously since last 10-15 years and is still increasing. Also Long term trend analysis is useful only if factors affecting same are constant, while in case of Gold we have seem paradigm changes in factors affecting gold.

Thanks

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73 Manish Chauhan February 2, 2012 at 2:44 pm

Yes Anubhav

I agree to your points .. The article never concluded anything . it was open data , thats all .. conclusions are on us to be made

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74 Rajandran R February 2, 2012 at 2:27 pm

@Manish

Gold Historical Weekly Charts had turned to buy mode this week. And my ichimoku charts double confirms it.

http://cdn.marketcalls.in/wp-content/uploads/2012/02/Gold-Weekly.png

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75 Manish Chauhan February 2, 2012 at 2:38 pm

Thats good to hear .. what are ichimoku charts ? And what is the time frame for this buy call ? It is short term like few weeks or longer

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76 Rajandran R February 2, 2012 at 3:12 pm

I normally use ichimoku charts to rate a chart as a buy/sell. The logic is very simple

1)Buy if the candle closes above the cloud with cloud as support
2)Sell if the candle closes below the cloud with cloud as resistance

After a long time Gold had closed above the cloud on weekly charts. And Ichimoku is mainly used for High Probability trading. And the Breakout on the weekly charts indicates a long term bullish trend with cloud supports coming around $1737(Dollar Terms). Current value of gold is $1756/Ounce

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77 Manish Chauhan February 2, 2012 at 3:24 pm

ok , its totally new to me actually .. will read it sometime :)

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78 Rajandran R February 2, 2012 at 3:52 pm

Ichimoku Trading system is little popular among my readers for low risk trading. Its a strategic tool rather than a forecasting tool.

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79 Bharat February 14, 2012 at 5:36 pm

Hi Manish,

Thank you for a very insightful note, however :

If u see these numbers for last 20 or 25 years ( don’t think going back almost 90 years will help predict for next 90 ) in light of the following 2 points :

– Gold Price Movement in Dollar Terms

– Rupee Vs Dollar Movement

These 2 charts will help us actually define the purchasing power that 2 paper money & 1 metal hold, because we in India grew at less than 3% for last part of last century, while Dollar ( the western currencies ) appreciated more in the same time, the gold price vs rupee seems depressed.

The case will be very very different if the Rupee was gaining against dollar ( high probability over the next 25 year )

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80 Manish Chauhan February 15, 2012 at 1:51 pm

Bharat

Yes .. your points make sense .. however this article does not take that into consideration and there is no conclusion made in this article ..

Manish

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81 Nooresh Merani February 15, 2012 at 1:24 am

Just got into this article as it had a mention of my view.

Before looking at an investment in gold one should definitely look at this article by Warren Buffet
http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

Also one of the major co-relation of Gold is with currency which many of us might miss. So i would prefer looking at Gold in US dollars where i believe the returns is sub 5 % over the last 100 years.

Gold may be a small part of the portfolio but dont consider it to be something which will provide consistent returns.
The only way it has given a good return is in ornamental use as it adds to the social element :) Like buffet says one ounce of gold will remain one ounce but as per

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82 Manish Chauhan February 15, 2012 at 11:21 am

Nooresh

Thanks for your views .. will look at that article !

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83 Prakash February 15, 2012 at 11:00 pm

Really amazing information. Thanks and Great work

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84 Manish Chauhan February 17, 2012 at 5:52 pm

Thanks Prakash

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85 Ramanath February 17, 2012 at 12:12 pm

Hi Manish,

I had a query. Is it a good idea to go for (Existing) Gold Loan and buy more Gold for a 2 years span and sell it after 2 years to repay the loan amount? Any statistics that I can expect profit/loss in this approach?

Thanks

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86 Manish Chauhan February 17, 2012 at 4:19 pm

Ramanath

jagoinvestor.com/forum is a better place to discuss it

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87 K.THOPATE September 18, 2012 at 6:45 pm

i like this quistion plz explan

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88 Manish Chauhan September 19, 2012 at 5:39 pm

Which question ?

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89 K.THOPATE September 20, 2012 at 8:09 pm

GOLD LOAN AND BUY MORE GOLD ?

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90 Manish Sharma February 20, 2012 at 3:52 am

Very Good Article On Gold Price….

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91 Mayank Gupta March 29, 2012 at 9:08 am

Gold took 51 years to move from 100 to 18500 (Year 1959 to Year 2010) where as Sensex took 31 years (Year 1979 to Year 2010) to move from 100 to 18500. It doesnt mean gold have given half the return given by Sensex. The compounding effect can be much more.

Mayank Gupta

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92 Manish Chauhan March 29, 2012 at 10:51 am

Yes Mayank , thats true … not sure what conclusion you want to make at the end !

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93 Mayank Gupta March 29, 2012 at 11:13 am

I believe equities can perform much better in the long run as compared to gold looking at the past data when India was growing at a average pace of 4-6% and future prospects of India growing at a much faster pace.

Mayank Gupta

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94 Banyan Financial Advisors April 1, 2012 at 5:47 pm

Hi Manish,
I think this article would very well complement with your gold price movements articles (http://insight.banyanfa.com/?p=363). I have tried to explain the reason behind the gold price movements and the possible way forward. My inspiration was one of the seminars held by a leading Investment bank where Head of Gold Trading of the biggest Investment Bank expressed his bullish views on Gold.

Would really love to hear your views on the article.

Regards
BFA

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95 Manish Chauhan April 2, 2012 at 5:28 pm

Thanks . .will go through the article soon ! .

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96 Banyan Financial Advisors April 6, 2012 at 2:34 am

I would look forward for your views.

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97 Arsh April 7, 2012 at 6:37 pm

Was going through a similiar article on another website on gold and found the below comment from a gentlemen.I am naive in financial charts and returns so need you guys to look at his statistics and give your feedback.Its long so please be patient :)
=========
http://xa.yimg.com/kq/groups/6548896/1091899790/name/Morgan%20stanley%20… Morgan Stanley report on CAGR over last 15 years for gold , equity , bonds and property .

Gold 15 year returns – 12.7%
Equities – 13.2 %
Bank FD – 7.9%

Crucially the most important thing is Volatility for Gold is just 12% while for Equities it is 40% .
HOw many strong souls are there which can see their MF go from 100000 to 50000 and stay put ??
Gold has had one way … UP !!! Not a single down year in last 15 years .
And to say that every person whom I have ever seen on TV has suggested to buy gold as just 10% to 15% of their portfolio only . ???

They would say it can work in practice that you make same amount of money buying gold with less than 1/3rd of volatility(read it as peace of mind) but it can never work in THEORY . Since I have spend 2 years doing MBA with excel sheets where i fancily project cash flows of companies whose names I did not know 2 months back for next 10 years hence I will keep doing that .
I cannot value gold as it does not give cash flow hence you should have it as 10% in portfolio even though I could open my eyes and look at the REAL returns made by people holding GOLD but I will just ignore it .
When looking at a straight up gold growth in RUPEE terms you said -Well why do not you look dollar terms returns and you know they are bad , it goes up and down .
So I ask you why dont you show equity(sensex) returns in $ terms .
http://www.bseindia.com/whtsnew/dollex.asp
Here I have made your job easier . Anyone who says sensex over 30 yr has given 17% CAGR in rupee terms needs to see what sensex in dollar terms . Guess what its a meagre 8.5% return in $ terms but you will say hey put your money in equity only and not gold jewellery . Now I think you would know why Warren buffet does NOT put money in Indian stocks for a measly 8.5% nominal Dollar returns over 30 years . So much so for spectacular growth of Indian equities.
Gold is money and it has been same for thousands of years . As you can see govt cannot print gold as Indian govt has done over last 30 years . If you see 1 USD = 8 INR in around 1979 but today its about 51 but USD has actually lost almost 50% of its values against a basket of currency around the world .?? What does that mean ?? It means that Indian govt has printed so much of currency that its losing its value greatly . So how to protect yourself from that loss in value ?? Have gold physical gold .
======
Sorry for such a long copy-paste but just wanted to share this gentleman view with you guys :)

Thanks,

=============

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98 Manish Chauhan April 17, 2012 at 9:54 pm

Better discuss it on our forum : http://www.jagoinvestor.com/forum/

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99 Nikunj May 26, 2012 at 11:02 am

Please answer the comment#87, rather than skipping it.

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100 Manish Chauhan May 26, 2012 at 11:09 am

Nikunj

The question is more of discussion type and it needs more than one person inputs , hence I suggested forum .

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101 Manish April 29, 2012 at 11:40 pm

Hi Manish,
Excellent Information, very useful and informative as well.

I have a small query to understand.
I want to invest in GOLD but trying to understand 2 things.

1) Should I invest in GOLD Jewellery or GOLD COINs, does it make difference (may be Jewellery is expensive than COIN) ?

2) Should I enroll for a Flexi Schemes (like Tanishq 11+1, where in 11 installment would be given by a buyer and 12th installment is given by Tanishq).
or should buy in one go, does it make difference in Price of GOLD in one year.?

Because then moment my flexi schemes get matured, of course the price of the GOLD would also increase.

Please advice.
Regards,

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102 Manish Chauhan May 1, 2012 at 11:24 am

1. Jewelary will also have making charges . Coins will not

2. Here is some discussion on the schemes like that : http://www.jagoinvestor.com/forum/golden-harvest-scheme-ghs-from-tanishq/2903/

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103 Sujit August 24, 2012 at 1:47 am

Here the choice will depended on your purpose. if its purely investment, then its better to go for Coins and bars, as you will not have to bear any payment or deduction of making charges at the time of purchase or sell, hence effective returns will be more compared to jewellery where you will have to bear these charges

Sujit

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104 Manish Chauhan August 26, 2012 at 12:44 pm

Yes it will be better than physcial jewellary !

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105 Abhilash Jose October 12, 2012 at 6:51 am

Do note one more thing that the gold coin will not be accepted at the banks in case you want to give it to the bank for availing a gold loan. It has to be jewelry that has to be given for getting gold loan. You may just have any small round thing attached to the coin (to use the coin in necklace) and make it as a jewelry item but that would cost a making charge but only minimal (say 2%) compared to a real jewelry item which may be 16-22%.

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106 Manish Chauhan October 12, 2012 at 10:23 am

Thanks for that information Abhilash

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107 Manish May 1, 2012 at 1:04 pm

Thank you Manish,
I have a Small query,
If I buy GOLD COINs and not a Jewellery, CAN we convert GOLD COIN in to Jewellery. ?
I heard from somewhere that , GOLD COIN can not be converted in to Jewellery as they are of 24 C and Jewellery are made of 22 C or 18 C?

Please confirm,
Thanks Again!

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108 Manish Chauhan May 2, 2012 at 11:05 am

I am not sure of this , but i dont see any issue why you cant do that .. just go to jeweller and you can do it

Manish

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109 Nivesh rai July 15, 2012 at 10:43 pm

thanx alot for excellent analysis.
can u guide me wich is d best season 2 invest in gold in d present day scenario.?

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110 Manish Chauhan July 17, 2012 at 10:35 am

There cant be a best season like this , what is your time frame ?

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111 vipan anand August 7, 2012 at 9:58 pm

dear manish, please guide me for a period of locking three year , should i invest in gold in physical form or in bank fixed deposit

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112 Manish Chauhan August 8, 2012 at 7:15 pm

Gold investment has no locking period, if you want to invest for tax saving then invest in Tax saving FD for 5 yrs !

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113 saurabh July 25, 2012 at 12:58 pm

manish,
have you seen that return from 2010 to 2011 is 42.7% so dont you think it is very much.
regards

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114 Manish Chauhan July 27, 2012 at 7:44 am

Yes , its good enough for that tenure

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115 Rajan kumar August 4, 2012 at 1:41 pm

hi
can i invest in gold this time for a good return.

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116 Manish Chauhan August 4, 2012 at 1:47 pm

Yes, but risk is always there

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117 G D Vadher August 21, 2012 at 3:48 pm

g8 research

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118 Sujit August 24, 2012 at 12:39 am

Manish, am looking for some information on how Physical & Silver Gold rates are decided at the jewellers showroom.

Also, would like to know about conversion process of exchange bought gold into Physical gold jewellery from a jeweller. What is the cost involved. The percentage of mix

Could you point me to any resource on this kind of information?

Sujit

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119 Manish Chauhan August 26, 2012 at 12:44 pm

I guess you can discuss it on our forum http://www.jagoinvestor.com/forum

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120 Jitendra August 30, 2012 at 11:12 am

Hi Manish,
Is it a good time to invest in Gold or in Silver for long term like 25 years?

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121 Manish Chauhan August 31, 2012 at 10:31 am

Yes, if gold prices rise always , but no one can predict it !

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122 bhagyesh September 14, 2012 at 10:05 pm

do you think investing for gold for a year is a good idea? what returns can one expect after the current growth in september…will it sustain?

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123 Manish Chauhan September 18, 2012 at 1:15 pm

No one can answer about the future of gold like this

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124 roo September 25, 2012 at 1:00 pm

hey it helped me a lot in writin ma assignment,,, :)

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125 Manish Chauhan September 26, 2012 at 11:40 am

Good to hear that !

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126 suprabha October 21, 2012 at 5:54 pm

Investing in gold for 1 year is better or investing in FD for 9% is better ?

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127 Manish Chauhan October 22, 2012 at 9:49 am

If gold prices will move higher than FD rates , then its better !

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128 Roopesh Shenoy October 29, 2012 at 11:21 am

The only time to invest in gold is when you have no faith in the currency – such as times of wars. Even then, you can buy real assets such as land which give the same benefit i.e. protection against inflation (however much more illiquid and not easy to move around).

Gold also carries a security cost. You need to keep it in a locker, and you run the risk of it getting stolen.

Equity or land are so much better in terms of investment for long term that I don’t know why people are crazy about gold.

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129 Manish Chauhan October 30, 2012 at 10:34 am

Roopesh

Good point

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130 Bhushan January 23, 2013 at 9:04 pm

One reason I can think of for investing in gold rather than real estate is the higher incidence of fraud. In big cities like Bangalore where land shark are rampant, it is very difficult to clearly identify if a real estate is clear from all legal perspectives. Even if a lawyer indicates it is clear at the time of purchase, you never know who stakes a claim in it in the future. This will not happen in gold if purchased from reliable sources like government refinery etc.

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131 Karan February 6, 2013 at 10:38 am

Security is no more an issue as you have something know as egold

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132 Abhinav Gulechha October 31, 2012 at 10:22 am

Hi Manish

Thanks for the post. I have been researching on why and to what extent one should invest in Gold. In that regard, if you visit the World Gold Council website (www.gold.org) they have done analysis and research over various periods and found out that since gold has a very low co-relation with other equity classes, a 2.5%-9% gold holding in portfolio reduces the risk-adjusted return of the overall portfolio. Also, during times of crisis, like 1996 -98 East Asian Crisis, and 2008 crisis, it was found that gold had a very small negative correlation with equity, which reduced the VaR (Vaue at Risk – possibility of worst loss) of portfolio in such times.

note that this research may be biased, but question is – If Gold council itself recommends not more than 9% gold in one’s equity portfolio – is there a sense in investing more and more in gold. In my view, gold is a fantastic risk management tool, which should constitute 5-10% of overall investment portfolio at all times, coupled with periodic asset re-balancing (i.e. booking profits and investing in other asset class when it crosses that threshold)

Regards
Abhinav

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133 Manish Chauhan November 2, 2012 at 11:35 am

Is that report findings true for indian environment as well ?

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134 Abhinav Gulechha October 31, 2012 at 3:53 pm

Manish

One more point. I really liked the charts – especially the 20 year time period chart – this explains so well, that unless you time your purchase and selling very well, gold is not that great an investment. Saying that, yes, credit goes to people who bought gold 5 years ago, returns from gold is 670% while return from equity is <5%:)

Regards
Abhinav

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135 Manish Chauhan November 2, 2012 at 11:25 am

Yes Abhinav .. all kind of charts have wealth of info inside it and its upto you what you interpret out of it

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136 Yamuna November 7, 2012 at 3:24 pm

Hi

We are getting a personal loan for supporting my husband’s business. I am thinking i will buy gold ornaments- plain with least making charges and wastages. I would keep them for gold loan and give my husband the money for his business. I would slowly take back the gold. By which i can support my husband and slowly saving. We have zero savings as of now and lots of debt as he started his business. I am not sure how much we can get return in business for this investment and hence thinking about this idea. We need to buy ornaments as they dont accept coins for gold loan. Will this be a wise decision? i dont want any big returns but wanted to save atleats this loan amount (10 lk). Please advice???… I request not to advice on alternate investment – my condtion is not having money in hand and looking for option. It is before i throw money into blackhole (as we donno what will happen in our business), im just thinking of way that i will get back this sometime in future. Please advice as early as possible.

Regards

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137 Manish Chauhan November 12, 2012 at 8:57 am

Why dont you just go for a business loan with bank ? How does your situation help ?

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138 suresh December 16, 2012 at 7:03 pm

you are talking about percentage.what its actually 12% means 1 per interest like that you are telling

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139 Manish Chauhan December 19, 2012 at 2:22 pm

Not sure what you mean ?

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140 Anil January 16, 2013 at 7:09 pm

Dear
This will be my frist comment reguarding the gold.
I just want to know that wheather the rates will go Up/Down , what ever you may know just share with me

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141 Manish Chauhan January 18, 2013 at 10:16 am

Anil

Do you think its possible to say that ? If it was known already , people would make millions !

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142 arun February 28, 2013 at 8:22 pm

can you include the gold price of 2012

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143 Manish Chauhan March 1, 2013 at 8:23 pm

How will it make difference to the conclusion ?

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144 Amrut March 11, 2013 at 3:21 pm

Hi Manish,

Need your advise-Thinking of selling Gold and buying property. Do you think it is a sensible thought or should I stick with Gold.

Thanks in advance.

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145 Manish Chauhan March 13, 2013 at 11:51 am

This is not a question anyone can answer you , if property is important for you, then go ahead, else not !

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146 Bangalore live gold rate April 28, 2013 at 5:20 pm

Excellent piece of information, I had come to know about your website from my friend kishore, pune,i have read atleast 8

posts of yours by now, and let me tell you, your site gives the best and the most interesting information. This is just the

kind of information that i had been looking for, i’m already your rss reader now and i would regularly watch out for the new

posts, once again hats off to you! Thanx a lot once again

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147 Manish Chauhan May 6, 2013 at 6:31 pm

Thanks

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148 Sita June 14, 2013 at 8:36 pm

Very informative graphs.
May I ask where you got the raw data from? Am I right in assuming this is the nominal price of gold in INR?

Thank You

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149 Manish Chauhan June 22, 2013 at 10:12 am

I got it from internet !

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150 Shashank K S June 19, 2013 at 11:45 am

I am not emotional about Gold at all but now i know why people buy it- As hedge against inflation. Although they sell it if there is no other avenue. But i dont understand why is government trying to curb purchase of gold? wont it lead to smuggling? Cant governments push ETF in a big way so that they can curb smuggling??

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151 Sita July 19, 2013 at 8:29 pm

Where on the internet? Is it a reliable source?

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