Explore the key differences between Gold and Equities in volatile Financial Markets

In 2025, global financial markets are witnessing high levels of uncertainty. This is due to reasons such as inflation, conflicts between countries, policy changes, and unpredictable economic indicators. In such a situation, investors are focusing on two major types of investments—gold and equities (stocks)—to protect their wealth. Both assets offer unique advantages and disadvantages when it comes to managing risk and earning returns during unstable times. 

This article explains how gold and equities are performing in 2025, how investors are using them to hedge against uncertainty, and which option may be better depending on the situation. 

Gold: A Traditional Safe-Haven 

Strong Price Growth in 2025 

Gold has seen impressive price growth in 2025. In the first few months of the year alone, gold prices have risen by almost 30%. This follows a strong performance in 2024, where gold gained 27%. These gains are largely because investors are rushing to buy gold as a form of safety when other investments become risky. 

Despite this strong run, gold prices have shown some recent drops. For example, after progress in peace talks between major economies like the United States and China, the demand for gold reduced slightly. As a result, gold prices fell by around 1.4% and settled at about $3,278 per ounce in mid-May 2025. However, many experts still believe that gold has more room to grow and could potentially reach $4,000 per ounce by the end of the year. 

Big Players Turning to Gold 

Institutional investors—like hedge funds and asset management firms—are also increasing their holdings in gold. Previously, gold was mainly seen as a backup asset for safety. But now, it is being treated as a strong-performing core asset. Gold has even outperformed some popular stock indexes such as the S&P 500, which only gave around 10% returns in 2024. 

There has been some selling activity in gold Exchange Traded Funds (ETFs), where investors took profits after prices soared. In April 2025, gold ETFs saw outflows of about ₹5.82 crore. However, this was much lower than March, which saw withdrawals of over ₹77 crore. Despite this, total assets managed by gold ETFs rose 4% from the previous month and increased a massive 87% from a year ago. This shows that while some investors are booking profits, many still have strong confidence in gold. 

Equities: Higher Returns with Higher Risk 

Market Performance in 2025 

Equities, or stocks, have had a bumpy ride in 2025. Early in the year, many stock markets around the world, including in India, fell sharply. This was due to global economic concerns, foreign investors pulling out funds, and local economic challenges. However, as the year progressed, market sentiment improved. Talks between countries reduced political tensions, and new trade deals were signed. This helped stock markets recover and even raise hopes of record-breaking performances by the end of the year. 

In the United States, the S&P 500 index has shown a strong recovery. Historically, this index tends to do well after it drops by more than 10%, especially if the economy avoids a recession. On average, the S&P 500 gives a 14% return in the following year under such conditions. Even during tough periods, like when tariffs and economic policies created fear under certain political leaders, the U.S. market eventually bounced back. 

Investment Strategies in Equities 

To manage the risks of stock market investing, investors are using smart strategies. Financial experts recommend focusing on large companies (called large-caps) instead of smaller ones. Large companies usually have stronger finances and better ability to handle inflation or weak demand. These companies are also better at protecting their profits, making them more reliable in tough times. 

Another strategy is to invest in stocks regularly over time, a method known as dollar-cost averaging. This reduces the risk of buying at the wrong time because the investor buys both when prices are high and low, averaging out the cost over time. 

Comparing Gold and Equities 

Risk and Return 

Gold and equities have different roles in a portfolio. Gold is known for being stable and low-risk, especially during uncertain times. Its recent performance shows that it acts as a reliable store of value when markets are volatile. 

Equities, on the other hand, offer the possibility of higher returns but come with more ups and downs. Stock prices can be influenced by company profits, economic trends, global news, and many other factors. 

Diversification Benefits 

Gold and equities do not usually move in the same direction. This is known as having a low or negative correlation. When stock markets crash or become too volatile, gold often goes up, providing a cushion to the investor’s portfolio. During economic booms, stocks usually outperform gold, offering higher returns. 

By investing in both gold and equities, investors can create a balanced portfolio that performs well in different market conditions. This combination reduces overall risk and improves the chances of earning steady returns over time. 

In 2025, investors are facing a lot of uncertainty in the financial markets. Choosing between gold and equities depends on one’s financial goals and risk tolerance. Gold remains a strong hedge against inflation, geopolitical risk, and economic slowdowns. It is especially useful when there is fear in the market. 

Equities, while more volatile, provide opportunities for long-term growth and wealth creation. By using proper investment strategies—such as focusing on strong companies and investing regularly—equities can still be profitable even in uncertain times. 

The best way to hedge against market uncertainty is not to pick one asset over the other, but to maintain a well-diversified portfolio that includes both gold and equities. This approach helps protect against losses and ensures that the investor can benefit regardless of which way the market turns.