Gold - A Strategic Asset
Investors India|December 2020
Gold - A Strategic Asset
Vishal Vijay Borwankar, Sr. Research Analyst
Gold - A Strategic Asset

Gold’s Strategic Role

Gold is a clear complement to stocks, bonds, and broad-based portfolios. A store of wealth and, a hedge against systemic risk, currency depreciation and inflation, gold has historically improved portfolios’ risk-adjusted returns, delivered positive returns, and provided liquidity to meet liabilities in times of market stress.

A source of returns

Gold is long considered a beneficial asset during periods of uncertainty. Historically, it generated long-term positive returns in both good times and bad. Over the past decade, the price of gold has increased by an average 14.1% per year in INR since 1973 after Bretton Woods collapsed. Gold’s long-term return has been comparable to Indian stocks and higher than Indian government bonds, also outperforming other major asset classes. It is used to protect and enhance wealth over the long-term and it operates as a means of exchange, because it has global recognition and is no one’s liability. It is also in demand as a jeweler, valued by consumers across the world. And it is a key component in electronics. These diverse sources of demand differentiate gold from other investment assets. They also give it a particular resilience: the potential to deliver solid returns in good times and in bad.

Beating inflation, combating deflation

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