It’s only in the last one year or so that gold has decisively done better than crude oil. The chart shows, however, that the returns from gold continued to be higher than for the Sensex till the middle of 2006, when the boom was already well advanced.

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In contrast to crude oil, the boom in other commodities has been relatively mild and it has completely collapsed after the financial crisis hit the markets. That seems to underline the very different supply-demand relationship in the crude oil market, where the Organization of the Petroleum Exporting Countries can act swiftly to curb output.

At the end of the decade, though, the outcome of the race is very clear.

Gold has emerged winner, with the Sensex and crude oil in almost a dead heat, the former beating the latter by a short head at the finish. Commodities come next, as represented by the Reuters/Jefferies CRB index.

And lagging at the end is the Dow Jones Industrial Average (DJIA). In fact, what is perhaps the most interesting bit about the chart is the absolutely dismal performance of the DJIA. Consider, for example, the fact that gold has consistently outperformed the DJIA from the early years of the decade. Also, the decoupling between the Sensex and the DJIA is clearly evident from the chart.

A large part of the allure of gold stems from the concern over the large fiscal deficits of the US and the decline of the dollar. If the US government opts for inflation to lower its debt and a weak dollar to help its exports, gold should continue to outperform. Also, as the chart shows, during the last cycle it took a long time for stocks to start outperforming gold.

Graphics by Yogesh Kumar / Mint

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