No precious metal is as legendary as Gold. Its beauty has provided it with status as a valuable commodity throughout the history of humanity. It has always been used as a monetary standard and for ornaments dating back centuries. And it continues to remain the most essential component of jewellery being the precious, most malleable and rare metal.
In the event of crisis, gold has helped not only individuals but also the Governments. As you may be aware, during 1991, Government of India had to move its gold reserves to Bank of England to avoid default on its international payments.
During 1997/1998, Government of South Korea collected 5 million ounces of gold from its citizens in exchange for Government bonds. This enabled the Government to service its external debt.
Why Invest in Gold
- Gold has consistently reverted to its historic purchasing power parity and, therefore, can be hedged against inflation. In other words, Gold has always beaten inflation.
- It provides consistency in total returns on investments and acts as an effective diversifier of savings.
- Gold prices do not have any correlation with any other asset class; its less volatile and last resort during war and currency volatility.
- Gold is a reliable store of value during financial, economic and social turmoil.
- Gold as a commodity is mainly used in jewellery and as savings. It is also a monetary asset.
- Gold acts as a hedge against depreciating currency.
- Gold is durable, consistent, valuable and precious.
- Demand for gold is ever increasing and the supply is always in deficit.
The best way to invest in gold is through Exchange Traded Funds (ETF) and the advantages are as follows:-
- ETFs are traded in stock exchanges which means easy liquidity.
- There are no add-on charges. You can buy and sell at International gold price.
- There is no risk of loss or theft.
- Physical gold is held by the custodian bank and fully insured. ETFs can be held in electronic form in the demat account.