Longest winning streak: Gold-Sensex ratio surges to 10-year peak, defying valuation trends

A sustained rally in gold and relatively muted equity performance have pushed the gold-to-Sensex ratio to its highest level in more than a decade, excluding the pandemic-driven disruption of 2020. The ratio touched 1.4 on Friday, a level last seen in early 2014 when it was close to 1.5.

By comparison, the ratio stood at 0.97 in December 2023 and 0.89 in September 2023. Over the past 30 years, the median value of this ratio — calculated by dividing spot gold prices by the Sensex — has been around 1.04, suggesting that current levels are well above historical averages.

Traditionally, gold and equities tend to move in cycles. Periods of equity outperformance are often followed by a surge in gold, and vice versa. For instance, equities dominated between 2003 and 2007, but gold rallied sharply in 2008–09 as stocks tumbled during the global financial crisis. Similarly, the Sensex enjoyed a near-decade-long run from 2012 to 2021, while gold prices stagnated.

Since September 2021, however, gold has been consistently outperforming equities — marking its longest winning streak in three decades. In the past four years, domestic spot gold prices have climbed 147%, rising from Rs 45,600 per 10 gm to Rs 1,12,895 as of Wednesday. Over the same period, the Sensex has gained only 37%, moving from 59,126 in September 2021 to 81,159 on Thursday. This divergence has pushed the gold-to-Sensex ratio up nearly 80% to 1.37.

Historically, a high ratio has been seen as a sign of equity undervaluation, offering buying opportunities for long-term investors. But analysts warn the present trend may not reverse quickly.

Period/Date             | Spot Gold Price (₹/10 gm) | Sensex Level | Gold-to-Sensex Ratio | Notes / Trend
------------------------|---------------------------|--------------|--------------------|-------------------------------------------------------------
September 2021          | 45,600                    | 59,126       | 0.77               | Gold begins longest 30-year winning streak vs equities
September 2023          | —                         | —            | 0.89               | Ratio rising as gold outperforms Sensex
December 2023           | —                         | —            | 0.97               | Gold gains relative to Sensex continue
Early 2014              | —                         | —            | ~1.5               | Last time ratio peaked near current levels
Current / Friday 2025   | 1,12,895                  | 81,159       | 1.37               | Gold up 147% since 2021; Sensex up 37%; ratio near decade-high
Median (30 years)       | —                         | —            | 1.04               | Historical average gold-to-Sensex ratio
February 2009           | —                         | —            | 1.73               | Gold peak during GFC; Sensex at multi-year lows

“Gold prices are now being driven primarily by central bank purchases as they diversify away from the U.S. dollar,” said Dhananjay Sinha, co-head of research and equity strategy at Systematix Institutional Equity. “This suggests a slow shift toward a gold-backed reserve system, something we haven’t seen in modern history.”

Gold is increasingly viewed as both a geopolitical hedge and a reserve asset, tightening supply in open markets. “Central banks are structurally raising the floor under gold prices by steadily reducing the amount available for trading,” noted Lina Thomas, research analyst at Goldman Sachs. The brokerage has advised investors to diversify into gold and commodities to protect against financial-market shocks.

Unlike past cycles, the current surge in the gold-Sensex ratio has not been accompanied by a fall in equity valuations. In February 2009, when the ratio peaked at 1.73, Sensex valuations plunged to multi-year lows. Today, however, the Sensex continues to trade near its post-Covid highs in both price-to-earnings and price-to-book multiples.

What this means for investors

For retail investors, the sharp rise in the gold-Sensex ratio signals a challenging environment. With both asset classes appearing expensive, the traditional playbook of shifting into undervalued equities may not hold true this time.

Analysts recommend a diversified approach:

Maintain exposure to equities, but focus on quality companies with strong earnings visibility rather than chasing momentum at high valuations.

Allocate 10–15% of portfolios to gold or gold-linked instruments such as ETFs or sovereign gold bonds, both as a hedge against market volatility and to benefit from central bank demand.

Consider debt and hybrid funds to balance risk, particularly as global interest rate movements and geopolitical tensions could fuel further volatility in both stocks and gold.

“Investors should resist the temptation to time the market based on ratios alone,” said a Mumbai-based wealth advisor. “Instead, building a resilient, multi-asset portfolio is the best way to navigate this unusual phase where both gold and equities are expensive.”

With gold cementing its role as a structural hedge and equities trading near peak valuations, experts believe the next few years may demand patience, discipline, and careful portfolio allocation from investors.