Will 2013 see gold shine or equity outperform?

by Rajesh Kumar, Live Mint  |  published on December 24, 2012

Gold

Allocating money into different assets has been tricky business in the last five years due to a variety of issues.

Those batting for equities have seen their faith being tested in this period, while money managers relying on gold, considered a safe haven, have done exceptionally well. Illustratively, if you had invested in gold in December 2007, your money would have gone up by a factor of three, but if you had bought equities, you would be pretty much where you started based on the performance of BSE Sensex.

Moreover, the returns for gold have been lot more steadier with double-digit returns in all the five years under consideration, while equities have been down 50% one year and up 80% the next year.

The last five years have been really difficult for equities the world over and Indian markets were no exception. However, the question is will this trend continue in 2013 as well, or will things begin to change in favour of equities.

The outlook for equity has definitely improved in the later part of 2012. As a result, the stock market in India is up about 25% in 2012 and has beaten gold, where money has grown by about 12%, by a wide margin. But it is also important to note that the stock market lost about 25% in 2011 even as gold went up 31% in the same year.

In this scenario, it would be interesting to see which asset class will outperform the other in 2013. The choice, however, will be as difficult as ever and there will be a number of factors, both national and international, that will play different roles at different points during the course of the year.

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