Is investing in gold a good idea for you?

Check the numbers. That’s the best way to decide whether gold is a good investment. Fifty years ago, 10g of gold cost Rs 937. Today, in 2019, you need to shell out Rs 33,000 for the same. Yes, that’s the margin! So if you had invested in gold 50 years ago, you would certainly have made a killing – even after accounting for inflation. (Here’s the math for the uninitiated: Rs 100 of 1970 is equal to more than Rs 3,880 today!) And the best part? This is just up your street!

Gold has always held allure for women. When the law did not make it mandatory for daughters to inherit family wealth, the amount of gold she got in her wedding was her legacy, her nest egg, her rainy-day emergency fund.

Remember those stories about how the matriarch of the family saved the day by suddenly producing a solid gold bangle to bail out the family business at the nth hour? (Not just stories too. My own great grandmother is said to have bailed her man out of a tricky situation – or so the family lore goes!) Gold was seen as a safe, solid investment which could always be counted on to come to the rescue in times of trouble. The conventional wisdom being that even if it does not appreciate phenomenally, at least it will never depreciate.

The gold safety net

The short answer then to whether gold is a good investment for the long term could be a ‘yes’, but only if we ask whether gold is a ‘safe’ investment rather than a ‘good’ investment. And the key word here is ‘long-term’. In the short term, mutual funds are a better option. So when buying that pair of earrings, it’s not a bad idea to check on the gold coins. Maybe you would want to invest in a small coin every time you’re out buying jewellery?

Pros and cons

The biggest advantage of investing in gold is that you are physically in control of your investment even if you need to spend on securing it – in a locker or insuring it.

On the minus side, there are no dividends that will come from your gold bangles or chains. The value arises only when you liquidate. And when you do, you’ll end up getting a sum minus the making charges. Hence for coins, or at best chains which do not have a high making charge. Those beautiful designs will not get you money but satisfy your artistic urges and do a mix and match.  

Remember, when you do go to sell your gold legally, you will need a receipt. So, selling your mother-in-law’s mother’s Navratan Haar may not be so easy!

Gold bonds

A good way of investing in gold is in gold bonds. You can buy Sovereign Gold Bonds from the Government of India through your bank. There is a lock-in period of eight years with the option of exiting after the fifth year. When you redeem your bonds, it will on the basis of the prevailing market value. And unlike jewellery, which does not earn anything sitting in your locker, these bonds give you a 2.5% annual interest. (No, it doesn’t require complicated paperwork!)  

Why do governments keep gold reserves

Gold remains a good investment with big companies and even countries – as the value of gold does not nosedive even when the stocks crash. There is a negative correlation between markets and gold prices with the tendency of gold prices to remain stable or even improve when stock markets crash.

As for everyday women, the rule is don’t put all your eggs in one basket. A wise decision would be to diversify your family’s investments – let him do his choice of investments, and you may want to buy some gold every year.

So yes, go for gold. But judiciously!

 

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