Is Gold investment still worth the shine?

Is Gold worth the Investment?

Why we own Gold?

I have always been fascinated with gold and to some extent to silver. Since medieval times, we have been using gold as a mode of currency. Hence, it is termed as god’s money. Gold is something that’s very precious and is also available in rare abundance. As per expert calculations, we got about 57,000 metric tons of gold underground. (We don’t know what quantity of gold is exactly available for extraction).

But, space mining and deep-sea mining areas in the near future. Though the chances of finding metals can be in abundance in the near future, the cost of extraction will be high at the initial stages.

Physical gold is the ‘perfect hedge’ against the Paradigm shift such as the ones we had in the recent past (2008 – The Great Recession), the one we’ll have in the near future I.e 2020 and further. Demand for gold has skyrocketed in recent days for people who have low trust in the fiat currency monetary system (Now, that the US has printed trillions of dollars out of thin air!). At times of recession, the general public tends to seek those investment opportunities that are not easily manipulated, they tend to search for something that can give safe haven rather than a good return for a short span only to blow it off in days!
That’s where gold comes in,

Is Gold a safe bet against Inflation?

  1. Gold has the capacity to beat inflation over the long term investment perspective. Since 1964 to date, the gold price per 10.grams has risen from 63.25 to ₹ 50,000 as of today (27th June 2020).
  2. Gold is highly liquid (people don’t recognize this aspect). You can sell gold literally anywhere and get the price as quoted by the current market price. Gold has a store of value that doesn’t diminish over time. The key is to hold gold for long.
PC: Gold rate History in India, From 1964 till 2019

With that said, we are staring at probably the worst market crash ever. We would get to see further unemployment and businesses shutting down. This pandemic is no less than WW3!

With all this, the end of fiat currency is near! (Fiat currency is nothing but the money printed by the governing body under government supervision. Like the Fed, RBI) Although there shouldn’t be government supervision, the authority to print money is to be based on market conditions and the economic impact it has to bear. But, that’s not going on around!

With the end of US Dollar based fiat currency (most probably) we’ll need some alternative. Something that’s real and has intrinsic value. A non-manipulative asset!

Cryptocurrency is technology is the best thing that could happen in the 21st century. But, the coins such as Bitcoin, Ethereum, Ripple, and others are not backed by the government or governing body. It was created out of thin air, chances are it might not be there by the coming decade! I mean, what gives Bitcoin to be so valuable (just because it was the first of its kind?).

Gold has been with us since 3000 BC. We have used all kinds of commodities as a medium of exchange. But, Gold stands out for all of them for gold is unique, rare, measurable, non-perishable and most importantly they are trustworthy. If cryptocurrency is the future then, why not crypto based on gold? 

I see the future in this. And, if the government has to end the fiat-based currency system. The most favorable option available is ‘CryptoGold’. And, if that happens we can see gold reaching over ₹ 10,000 per gram.
Gold qualifies for safety, store of value. It’s something that’s rare and usable and has demand that goes on forever! When investing in gold & silver. See to that you buy actual metal such as coins and bars. Invest in gold and silver as how you save your emergency fund. And allocate at least 10% of your portfolio to precious metals.

Should we Invest in Gold now?

The annual average return on gold for 2020 was 24.6%. But, for 2021, gold has lost Rs.2000 per gram thus being one of the worst investments. And, since the year 2000, for 21 years, Compounded Annual Growth Rate in Gold Investment is at 12.20% which is pretty good actually.

So, now that we have concluded that gold is a good investment for the long term but a lousy investment for the short term. 

We’ll see what are all the options we have to buy gold in India as in SIP

Three major ways to Invest in Gold:

Gold Vault

We all know this. Via Google Pay, Phone Pay, Paytm, and others, we can buy or sell gold back to MMTC-PAMP. This is 100% safe and reliable. This option is suitable for those who are fine with holding gold for the long term. You’ll have to pay 3% GST both while buying & selling. You can get the gold in the physical form delivered upon paying a certain amount of fees. I wouldn’t suggest this.

Gold ETF

Here, an investor can buy a proportionate value of gold. Via Demat account, we can buy “Gold ETF” and there are 36 Gold ETF’s almost all of which serve the same purpose. Gold ETFs are considerably cheaper than our option 1 and you can also get the gold in physical form if your total Gold ETF units are equivalent to 1 kg of gold. This option is fine.

It’s cheaper, more flexible, and promotes you to do SIP in Gold ETF.

Sovereign Gold Bond (the SGB)

This option is specifically for those who are fine with locking their investment for 5 years and in return wish to earn interest on investment. SGB’s provide 2.50% interest p.a on your initial investment, paid semi-annually. This is actually good.

All the said options are fine. And, each option has its own perks.

What’s the best way to invest in gold? 

It’s to buy physical gold bars. No, I’m not talking about the one you buy in various shops where you’ll have hallmarks and designs and all.

I’m talking about the bar that your nearby gold vendor gets. It doesn’t look neat, it has no designs or hallmarks but it is 100% pure and a worthy investment. Go talk to your nearby gold dealer. Here, the integrity of the dealer is very important. So, be cautious. But, if you can get hold of a Gold dealer, he can get hold of the best gold at the cheapest price.

YouTube video explaining the Best Way to Invest in Gold:

Disclaimer: All the information on this website is published in good faith and for general information purposes only.

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8 thoughts on “Is Gold investment still worth the shine?”

    1. Hi Wilfred,

      Thank you for checking out our content.

      You are right when you say “clobbered” for the Bitcoin return over investment is more than anything we have ever seen. Bitcoin did take more liquidity. One that could have boosted gold price.

      But, Bitcoin is more speculative in nature. With 15 – 30% drop with minutes. While Gold is more sustainable. Hence, gives a lesser return.

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