Investing: Should you go for stocks or gold?

Stocks continue to outshine gold and silver when it comes to adding to investors' wealth by giving 8 per cent return so far this year.

The BSE 30-stock benchmark index, Sensex, has generated a positive return of 8 per cent for investors so far this year, while gold prices rose by 2.14 per cent. Silver fell however by 1 per cent.

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Gold was at Rs 29,800 per 10 grams on December 31, 2013 and silver was at Rs 43,755 per kg.

While, gold closed at Rs 30,440 per 10 grams yesterday, silver was at Rs 43,300 per kg.

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On the other hand, Sensex, which was at 21,170.68 points on December 31, closed at all-time high of 22,876.54 on Wednesday.

After outperforming stock market for more than a decade, gold has been on a back foot for more than two consecutive years now vis-a-vis equities. 

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Market experts said gold's under-performance compared to stocks this year was mainly due to robust foreign funds' investment in Indian equities.

They said stock market sentiment has improved on the hopes that a strong, pro-reforms government will come to power after the ongoing general elections are over in mid-May.

Investors expect the Indian economy to improve and the inflation to ease, they said. 

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"Emerging markets globally have done well this year. Besides, investors back home are counting on the elections' outcome. Also FIIs, a major driver of the Indian stocks have been putting lot of money in the equities. All this has supported the markets," Augment Financial Services' Founder and CEO Gajendra Nagpal said.

Improvement in the world economy has brought the risk appetite back amongst retail investors and this has drenched the liquidity from safe havens such as gold leading to its under-performance, an expert said. 

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Last year, the Sensex gave a positive return of about 9 per cent to investors, while gold prices fell by about 3 per cent and silver plummeted close to 24 per cent.

In 2012, the Sensex rose by over 25 per cent, which was nearly double the gain of about 12.95 per cent in gold prices.

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The appreciation in silver was at about 12.84 per in 2012.

Gold is normally preferred as a hedge against inflation, and investors tend to park their money in bullion considering it a safer bet in times of market uncertainties.