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Gold Vs Equity: What’s the relationship between gold and DFM General Index?

February 2016

By Fareem Chagla

February 24, 2016 | 17:30 | Dubai

Global stock markets have started the year on a tumultuous note with most experts drawing parallels between the current scenario and the 2008 global financial crisis. Global growth concerns as reflecting in the downward spiral in commodity prices, fear of a hard landing in China and focus on the US Fed Reserves policy has kept markets on tenterhooks. Investors are fleeing to safe-haven assets away from stocks. With gold having scaled the USD 1200/troy ounce level, its role as the ideal traditional safe-haven stands validated. Wealth Monitor Intelligence has charted the price data for the last 10 years of gold against the Dubai Financial Market General Index (DFMGI) performance to help our readers get a perspective. What clearly comes out from the chart are three distinct outcomes:

(1) 2008: When gold prices started shooting up sharply in the wake of the global crisis. From January 2008, the emergence of the global turmoil, the next 24 months saw gold zoom 120%.

(2) 2013: The year when the DFMGI moved up nearly 80%, gold prices took a backseat, translating into one of the few years it lost the race to the index.

(3) 2016: The current calendar year has seen the yellow metal scale up over 14% in a short period of 2 months. Whether it has outplayed its role with this outperformance during the initial phase of the year is a question, events over the coming months would help define it.





Additionally, during the 10 years preceding 2016, gold has given positive returns for 7 years. Over the period the yellow metal has returned a CAGR of 7.85%. Wealth Monitor Intelligence has traced the volatility for gold (on monthly basis) during the last 10 years, which is fairly subdued currently compared to a few months back.


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