Gold Reigned Supreme: Analysis Reveals Physical Gold Dominates Mining Equities

The debate over investing in gold versus gold mining companies has been ongoing for years. While investors are drawn to the potential of equities, a recent analysis suggests that physical gold offers superior returns and lower volatility.

A 16-year dataset covering 3-year daily rolling CAGR returns was examined by Rupee With Rushabh Investment Services, with results showing direct gold prices delivered an average annualised return of 13.2%, compared to just 6.5% for gold mining equities.

The study also found that physical gold doubled the CAGR of mining equities over a 3-year holding period and yielded positive returns in 87% of all observations, exceeding 10% returns 60% of the time.

In contrast, the DSP World Gold Mining Overseas Equity Omni Fund of Funds (FoF) achieved positive returns in only 69% of observations and exceeded 10% returns just 34% of the time. This suggests that gold mining equities are poorly suited for passive, long-term buy-and-hold strategies.