Gold As An Investment Option

Broadly, there are four ‘asset classes’ or ‘investment options’ which are commonly used to construct a well diversified investment portfolio.

These are Debt, Equity, Real Estate and Gold. Out of these four, gold is most misunderstood and least discussed investment option. In Indian context, gold assumes greater importance due to social and cultural reasons. For centuries gold is synonymous with wealth, status, security and protection. In traditional Indian families, gold is regularly purchased on various occasions and festivals like child birth, marriage, wedding anniversary, birthday, dhan teras, Diwali, New Year, Akshya Tritiya and list is long and endless.

Also, gifting of gold within family members from mothers to daughters, from mother-in-law to daughter-in-law, from parents to children and amongst brothers and sisters is considered auspicious and is an integral part of festivities and celebrations. As a result, most Indian families have acquired/invested significant part of their savings in gold or gold ornaments.

Gold is an unproductive asset and its prices are largely determined by supply and demand and because supply is limited, its prices tend to rise over the years with growth in demand. However, the Million dollar question is whether investment in gold results in long term wealth creation ? The answer is a disappointing “NO”.