In a surprising turn of events in 2025, gold has taken the lead over equities, delivering stellar returns for investors. While equity markets, particularly the Nifty 50, have seen muted performance, Gold ETFs have surged, offering eye-catching returns to those who stayed invested through Systematic Investment Plans (SIPs). This contrast has left many investors wondering: should they consider shifting their SIPs from equity ETFs to gold ETFs?
The data from the past year is telling. SIPs in Gold ETFs, such as the Axis Gold ETF, delivered up to 54.85% annualized returns (XIRR). In contrast, SIPs in Nifty 50 ETFs like the ICICI Prudential Nifty 50 ETF and SBI Nifty 50 ETF offered returns in the range of just 2.87% to 3.03%. This stark divergence has raised questions about asset allocation and whether gold deserves a bigger role in an investor’s portfolio.
Several factors have contributed to gold’s outperformance. Central banks around the world have been aggressively buying gold to diversify reserves and reduce their dependence on the US dollar. Inflation has remained sticky in several major economies, prompting investors to turn to gold as a hedge. Additionally, global geopolitical tensions — including ongoing conflicts in Eastern Europe and the Middle East — have driven up demand for safe-haven assets like gold. A weakening dollar has further supported gold prices, making it more attractive to international buyers.
Meanwhile, Nifty 50 ETFs have had a relatively quiet year. Despite steady domestic demand and decent corporate earnings in select sectors, broader market performance has been underwhelming. Foreign Institutional Investors (FIIs) have pulled back due to global uncertainty, while sectors like IT and manufacturing have faced pressure. This has weighed on the index, resulting in subdued returns for SIP investors.
Given this context, many are asking whether it makes sense to shift their SIPs from equity ETFs to gold ETFs. The answer, however, is not straightforward. Equities and gold play very different roles in a portfolio. Gold acts primarily as a store of value and a hedge against volatility, while equities are designed for long-term growth and wealth creation. Making drastic changes based on short-term performance may disrupt a well-balanced investment strategy.
One of the core principles of SIPs is rupee-cost averaging — investing regularly regardless of market conditions to benefit from long-term compounding. Exiting SIPs based on short-term returns undermines this discipline. A better approach might be to diversify instead of switching completely. Financial planners often recommend a 10-15% allocation to gold within a broader investment portfolio to mitigate risk and reduce volatility.
It’s also important to consider timing risk. Gold tends to be cyclical, with returns often spiking during times of uncertainty but remaining flat during stable economic periods. Betting heavily on gold now could result in lower returns if global conditions stabilize and investor sentiment shifts back toward equities.
From a taxation perspective, gold and equity ETFs have their own nuances. Equity ETFs enjoy long-term capital gains tax (LTCG) at 10% if held for more than a year, whereas gold ETFs are taxed at 20% with indexation benefits only after three years. Liquidity and ease of exit are typically better with equity ETFs, especially for long-term investors.
Experts advise caution. According to Arvind Narayan, senior financial advisor at WealthBridge India, “Gold has delivered exceptional returns in 2025, but it should not replace equities as a core growth asset. It’s better used as a tactical allocation for portfolio stability.” He recommends a 70:20:10 equity-debt-gold ratio for moderate-risk investors and suggests rebalancing periodically based on market conditions and life goals.
Looking ahead, investors would do well to review their asset allocations instead of reacting emotionally. Rebalancing your portfolio to slightly increase gold exposure might be sensible, but abandoning equity SIPs could mean missing out on future upside. Global economic trends, central bank actions, and geopolitical developments will continue to impact both gold and equity markets. Staying informed and diversified is key.
In conclusion, while Gold ETFs have outshone Nifty ETFs in 2025, this performance should be viewed in context. Gold’s surge reflects a unique set of circumstances that may not persist. Long-term wealth creation still favors equity investments, and the best approach is to maintain a diversified portfolio. Rather than making abrupt switches, consider adjusting your allocations to reflect current market realities while staying true to your long-term investment goals.
