A friend of mine recently asked if he should buy gold. He asked this question when gold prices are all-time high. Gold crossed Rs 1,00,000 per 10 grams about two weeks ago. However, this is the worst time to invest in gold.
Generally, investors want to buy an asset when its prices are climbing. This thing is also seen during the bull run in stock markets. This is also seen in some special sectors in shares. Some time ago we saw how investors were running behind PSU and Defense Stocks. A similar situation was seen in midcap and smallcap stocks, when investors were showing more interest in them.
Now this thing is being seen in gold.
There is no doubt about the fact that investing in shares is good for investment. But, when it comes to gold, the matter is slightly different. Experts have different opinions about investing in gold for some reasons. I do not mean to say that you should not buy gold. I just want some things to be clear in your mind before investing in gold.
Why do you want to invest in gold?
Gold is not considered a productive asset, as it does not bring any kind of cash flow. Like a property, gold does not cause any rent income. Like shares, gold does not bring any kind of dividend income. Finally, you do not even have any interest income.
Are you looking for a safe option for investment amid growing upheaval in the world? The tariff is estimated to increase the recession of the American economy and increase inflation. There is also a situation of uncertainty about global economy due to tariff war. Geopolitical collision continues in Ukraine-Russia and Middle East.
Is gold the best means of safe investment?
When I was in the Morningstar, I asked two colleagues of the Investment Management Team, which asset should be considered a safe haven. A friend said that safe haven means an asset whose value remains or increases even in the market amid uncertainty or decline. This protects the capital from drowning. This does not affect the market ups and downs. It also helps in diversification of portfolio. Gold is an asset whose value is permanent. Time has no effect on its quality. Therefore it can be considered as safe haven.
An asset is also considered a safe haven for these five other reasons. First, there should be good liquidity in the market for him. Second, apart from maintaining the value, there should also be another motive behind it. Third, it should be rare. Fourth, people should need it in future. Fifth, it should not be spoiled over time.
Bonds of the US government can also be safe haven assets. They have a lot of liquidity. They are permanent and are guaranteed their demand. However, it has no other utility other than investment and the government can issue as much bonds as he wants. Investing in bonds is income as an interest. In contrast, gold is a natural resource. This does not provide any kind of interest income, but the value of gold increases when the interest rate is low or negative.
Gold is forever
The value of gold always remains. We have been watching gold for hundreds of years. Its value will remain in future also. Its ability to maintain value for thousands of years makes it a safe haven asset. Whenever there is upheaval in the world, gold prices rise. The interest of investors increases in it. During the Global Financial Crisis in 2008, Gold gave more returns than other assets. Even when Kovid started in 2020, gold was seen in gold.
Therefore, there is no doubt that gold is a safe haven. This is essential for diversification of portfolio. During the major decline in the market, it prevents the value of the portfolio from decreasing.
Gold prices also fall
Now we talk about the history of gold prices. In September 1980, the price of gold was $ 650 an ounce. A decade later it went below $ 400 an ounce. In early January 2007 it crossed $ 650 an ounce. Don’t you think Gold again achieved a $ 650 level after a long time? On April 15, 2005, Gold was at $ 423 an ounce. Two decades later on April 15, 2025 it was $ 3,222 an ounce. This is a return of about 10 Cagr.
Gold prices will increase in the long term. But you cannot always expect its prices to go in one direction. If you want to invest in it, you can do it, but there is no need to be impressed by the kind of things that are happening about it right now. You will have to be ready for stability in gold prices and even fall.
What should you do?
You can buy gold from the bank. But, if needed, you have to sell it to the authorized dealer, as banks sell gold but do not buy it back. Apart from this, keeping it safe is also a challenge.
You can buy gold jewelery for hobbies or to gift your children. According to the design, the making charge of gold jewelery can be 10-15 percent of its purchase price. When you go to sell gold jewelery, you have to forget this making charge. The purity of gold is also a major issue.
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Gold ETF is the Gold ETF, the most easy investment in gold. By investing in it, you get a physical metal value. It is available in dematerialized form. This means that it does not have a challenge to keep gold safe.
Larisa Fernand
(El Fernand writes on personal finance and investment. The idea expressed here is his personal views. It has no relation with this publication)