Why should we invest in Gold?
Gold has etched its presence in world history as early as 500 B.C, when King Croesus of Lydia made his coins of gold. Gold has an ethnic and cultural background and is interwoven across different societies and traditions worldwide.
Of all metals, gold is considered the most popular investment option in India and across the globe. The purchase of the yellow metal is driven by its increased usage in women in the form of jewellery.
“My wedding plan for this year spells trouble for me. Trends showing gold prices at all-time high, jewellery shopping will literally drain out all my savings. My family would be obliged togift around 5 sovereigns of gold jewellery for my spouse. I don’t have the financial freedom now to make these investment decisions in gold”, articulates a person who is indecisive about his wedding. Does this ring bells in your life too?
Have you pondered why gold investments and purchases and always surged? Read on to understand some of the reasons to own the precious yellow metal.
It’s safe heaven
Gold is often considered as an alternative to currency. During times of distress or a global meltdown, gold is a store of value. In comparison to currency, gold is known to have maintained its value across centuries. It is also seen as a measure of wealth passed on from one generation to another. This further proves why our elder generations compare time with gold to say, “Old is gold”.
To beat inflation
Inflation can be defined as an escalation in the price of goods and services or when a particular formof currency begins to be devalued. For the price increase to come under the inflation ambit, the rise in price has to be a sustained one. Over a period of time, you’d be able to buy a lesser percentage of good or servicethat you previously possessed,for the same rupee or currency you own. With the onset of inflation, the prices of gold escalate when the cost of living increases. This helps the investor as the value of the investment in the metal fetches him more returns than an investment in shares or equity during times of volatility.
Increasing Demand
Studies reveal that India is one of the largest consumers of gold. Its many uses arrive from passion to possess the metal in the form of jewellery and as a traditional handover from generations. It is considered as a symbol of pride and ego to be in possession of the priced metal. The increase is more during the auspicious wedding seasons, or earmarked days called “Akshaya Tritiya” and “Dan Teras”, where gold purchase is a custom.
In China too, gold bars are a traditional form of saving, and the demand for gold has been progressing steadfast.
Portfolio diversification
Investors diversify their portfolios across multiple geographies, style and sectors. The volatility of the portfolio is reduced when assets with a varied and low historical correlation is included. Small allocation to gold in a portfolio can reduce the risk and provide higher return trade-off of investment portfolios.
Investment for corpus fund needs
Many a times, a need arises for funds in dire cases of emergency. It is at this juncture that gold investments come handy. At an instance where the individual is cash strapped, apart from liquid cash and short term liquid funs, gold is an immediate answer for funds.Being a metal that is often traded and bought, it can be sold for cash, or even pledged for loans.
In India, there are specialized institutions like Muthoot Finance etc., which supplement immediate cash requirements by financing through gold.
Gold has always fascinated people across religions, geographies and culture, not only for its scarcity but also for its use. The history of gold dates back in centuries, where it was used only members of the royal family and as coins in trade.
A comparison between peer group of investments
Comparison
| Gold
| Other Investments
|
|---|---|---|
Buying and selling
| Easy
| Hard
|
Appreciation
| High
| Low when compared to gold
|
Liquidity
| High
| Low
|
Options to Invest
| Limited
| High
|
Facts you didn’t know about Gold
We have seen gold adorned as jewellery and traded as coins; here are some interesting points about goals that lure you more to the metal:
- Gold is derived from the Old English word ‘Gelo’ which means yellow
- An ounce of pure gold can be hammered into a nine square meter sheet.
- The melting point of gold is 1064 degree centigrade and boils only at 2808 degrees.
- Only very few chemicals can attack or damage gold, and that’s primarily the reason it retains shine even if buried under the earth for over 1000 years.
- Gold causes minimum discomfort to the skin and body as it conductivity is unique. It closely matches the average human body heat which is close to 37 degree centigrade.
- Studies reveal that close to 15% of annual global gold consumption is recycled each year. That means your dental filling could have ancient Egyptian gold in it!!
Gold when invested in the right manner and through the right channels can create capital appreciation. Invest in gold and you would soon realize that the yellow metal can work wonders for your finances.
