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Why gold continues to remain the most stable investment class

By Finserv MARKETS - Aug 2,2019
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Why gold continues to remain the most stable investment class

In recent years, it has been argued by experts that in the future gold as an asset class will not be a preferred avenue for investment; demonetization and strict tax monitoring supports this argument as such actions restrict diversion of black money to gold. But it is apparent that gold has been a constant performer and the demand for it continues to grow. In India, gold is not just an investment mode but also reflects status and wealth. The metal has religious and cultural significance too. It is considered almost mandatory to purchase gold in the form of jewelry and coins during marriage ceremonies and religious festivals like Akshaya Tritiya and Diwali. In 2019, on Akshaya Tritiya, which is celebrated on May 7, many retailers reported a 25% jump in sales over last year.

However, Indians invest in gold not just because of these practices and beliefs but also because it is a stable investment that provides good returns. According to a study by the World Gold Council commissioned by the World Gold Council and Federation of Indian Chambers of Commerce and Industry (FICCI), ‘Indian consumers view gold as both an investment and an adornment. When asked why they bought gold, almost 77 per cent of respondents cited safety of investment as a factor, while just over half cited adornment as a rationale behind their purchase of gold.’

The table below indicates the average price of gold per year from 2003 to 2012. The prices are for 100 grams of gold in Indian currency.

Year Price (Rs.)
2003 Rs. 5,600.00
2004 Rs. 5,850.00
2005 Rs. 7,000.00
2006 Rs. 8,400.00
2007 Rs. 10,800.00
2008 Rs. 12,500.00
2009 Rs. 14, 500.00
2010 Rs. 18, 500.00
2011 Rs. 26, 400.00
2012 Rs. 31, 050.00

Prices have shown an extended period of growth year on year. In India, there is indeed a preference for physical assets including real estate, gold, and so on, and Indians consider gold as a safe haven; this essentially means that gold will perform better in times of when returns from other assets may not be positive.

When inflation hits the market, the value of currency comes down. During this time, people hold money in the form of gold. It is used as a hedge against inflation.

There are a few factors that will further encourage investors to invest in gold. The major reason is the restructuring of schemes that will help people to easily register themselves for opening a gold deposit account. Geopolitical and economic turmoil will have a major impact on global markets and, therefore, investors will be keen on investing in gold and inflation will drive the gold prices in the market. According to approximations, the demand of gold is more than its supply; by almost 1,000 tonnes and, therefore, the value of the asset will increase.

Over the years, it has been perceived and established that gold is the most secure and stable form of investment, globally. Although market offers a dozen alternatives , but investors definitely allocate a good portion, if not major, of their assets in gold, making gold a popular and powerful mode of investment.

A new force has been sweeping the gold market – digital gold. Online gold is an instrument that allows you to purchase gold online without actually holding possession of the physical metal. This has several benefits. For one, you can buy in any quantity – large or small. You do not need to worry about storing it and keeping it safe from theft. Purity is guaranteed when you buy from a trusted online seller like Finserv MARKETS. Moreover, liquidity is instant. You do not need to physically travel to your local jeweler. You can sell online anytime at transparently visible prices. The process is fast and simple, and does not involve any documentation. Unnecessary costs are eliminated as well, including making charges, seller and storage fees. The flexibiity to buy and sell in any quantity really helps digital gold stand apart. Moreover, there is transparent price discovery – you do not need to go from one jeweler to another to find out the market rate. Thus, if you were considering buying gold, explore buying gold online from Finserv MARKETS as superior alternative.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere.

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