Gold is one of the world’s most valuable metals. It is also considered the most stable and secure asset for investment purposes, especially in India, where gold is almost necessary for women. The Indian jewelry market is one of the largest in the world. And the most common metal in the Indian jewelry market is gold.
Although, there are a plethora of investment options in the market for people wanting to invest their money. But gold still beats all other assets, as no other asset can provide the kind of capital security like gold does.
Below you can find 5 Reasons why Gold is considered the ideal investment option:
1. Security of capital during recessions in the economy
Prices of Gold tend to increase during difficult situations in the economy. Because people start withdrawing their investments from the riskier asset classes to put their money in gold, let us take the most recent example. In March 2020, when the Coronavirus hit India and the Prime Minister announced a lockdown, the Stock Markets crashed around 30-40% within a month.
On the other hand, the value of gold appreciated by around 30% during the same time. The same thing has happened before, and whenever the economy goes into recession, people always take their money out from the riskier assets like Equity and mutual funds. And put their money in safer assets like gold. It proves how much trust people have in gold.
2. History of Gold assures its investors
Whenever an investor thinks of investing his money in any asset, they must first track the past performance of the asset. The whole technical analysis of any asset is based on the history of the same. An investor must find out how the asset has performed during recessions, upturns, and in general.
Now, when we look at how gold as an asset has performed over the years. An investor will find that the price of gold has been incredibly stable and has appreciated over the years. The appreciation in the prices of gold is led by a lot of micro and macro factors. Macroeconomic factors include the dollar-rupee equation.
When the rupee depreciates against the US Dollar, the prices of gold tend to increase to balance the equation. Then the most crucial Microeconomic factor that affects the price of gold is the retail demand for gold in the market.
Generally, gold prices increase during the festive seasons. India does not lack in festivals. We even have one specific day when people prefer to buy gold called “Dhanteras“. Investing in gold can provide peace of mind to its investors.
3. Resilient to Inflations and Deflations in the Economy
Inflation and deflation are some other macroeconomic factors that affect the prices of all kinds of assets. Higher Inflation in the economy generally drives the prices lower of various asset classes. On the other hand, gold is resilient to such factors that threaten the high prices of assets.
Gold’s performance generally depends upon its demand during several festivals India enjoys, as was mentioned in the last point. A healthy demand by the customers during October-November(Festive season) drives the prices of gold upwards.
During deflation, the prices of various assets are generally lowering all over the market. It is generally a short-term phenomenon for gold, and its prices don’t fall through, like most other asset classes. Gold is an extremely stable asset class, and its prices don’t see excess volatility through such factors.
4. Stable returns over the years
Gold has provided an average 11.7% CAGR Return in the past 12 years. That is way better than the different FD’s provided by the banks. At max banks, Fixed Deposits offer 6-7% returns to their clients, which is incredibly lesser, considering the strict deposit that the users have to maintain. BSE major index SENSEX has provided 11% CAGR returns over the past 10-year time frame.
Gold provides security to the capital and a substantial capital appreciation to its investors, which is better than most other asset classes. In certain years, equity provides better returns than gold, but equity can never provide security to the capital as gold does. Equity investment is one of the riskiest options available in the entire market.
Most investors use gold for diversifying their portfolios. Diversification of capital in different asset classes is crucial for the security of capital. And therefore, gold has won such high popularity over the years among investors.
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5. Easy Loans through Gold
Gold also helps provide easy loans to its investors. The need for loans can arise anytime for anyone, and gold can be a blessing in disguise during such times. Gold Loans are prevalent in India. If a borrower goes for a personal or any other loan, the interest rates would generally be very high.
However, gold loan interest rates are as low as 6.70% p.a, and this type of loan is given against gold which means the borrower can take back their gold as soon as the loan amount is paid in full.
These were some of the many benefits that gold provides. Investing in gold gives investors security, capital appreciation, peace of mind, and easy loans during emergency times. There are several methods of investing in gold. An investor can directly purchase physical gold through the market or buy digital gold, which comes cheaper than physical gold, through various Payment apps, like PhonePe, Paytm, etc. So, if you have any surplus capital lying around that you are looking to invest somewhere. Gold would be an ideal choice.
Gold Loan Per Gram:
|Gold Loan Per Gram Today Rate||Gold Loan Rate Per Gram Today is ₹ 4,621|
|Eligible Age||18 to 75 years|
|Documents Required||Basic KYC documents for address and identity proof. No income documents and no CIBIL score documents are required.|
|Loan Amount Eligibility||Rs. 1,000 to Rs. 5 Crore|
|Purity of Gold||18 carat to 22 carat|
|Type of Gold||Gold jewelry and gold coins of 18-24 carats|
|Margin in Gold Loan for the Bank||25% of the gold ornament’s market value|