For years, Indians have treated gold as a symbol of prosperity and wealth. While you might be familiar with the ornamental and auspicious value of gold, it also holds immense value as an investment vehicle. With the rising market volatility, gold’s value as one of the safest investment options has amplified.
Investing in gold has several benefits, from accruing inflation-beating returns to acting as a safe-haven asset. The consistently high gold rate in Hyderabad, Mumbai, and other cities also suggests strong future prospects for the asset. If you haven’t invested in gold yet, here’s a list of the top 4 benefits you’re missing out on:
Crisis Management Asset
High inflation lowers the purchasing power of the Rupee. In such times, investors turn to safe-haven assets like gold to hedge inflationary pressures. Gold being a value-holding asset, doesn’t lose out to inflationary pressures. Moreover, historically, the stock market has often plunged during high inflation years. However, gold rates in Hyderabad and other Indian cities have remained on an upward journey during those same years.
Gold investments are also instrumental in weathering market uncertainty arising from geopolitical crises. As a ‘crisis commodity’, gold rates often move in tandem with escalating global tensions. Thus, in such times, gold tends to outperform other investments by quite a margin.
For instance, last year, the Russia-Ukraine war and the weakening Indian Rupee impacted gold rates in Hyderabad, Delhi, and other Indian cities. Since India meets its gold demand through imports, weakening of the Rupee increased the overall cost of gold.
Portfolio Diversification
The right strategy for portfolio diversification includes investing in assets that are not too closely correlated with each other. Historically, gold values have demonstrated a low to negative correlation with other major asset classes like stocks and bonds. Thus, the fall of equity markets has been followed by a rise in gold prices.
The rationale for this price rise is simple: the demand-pull. With equity markets declining, as an investor, you may look to diversify your investment portfolio with gold and rush to put your capital in gold to weather the rainy days. Thus, according to experts, even a 10% exposure to gold assets can give your portfolio a hedge against capital losses from equities.
Maintains Value
Investments come with a certain degree of risk and volatility. For some, like stocks and bonds, this volatility ratio tends to be high, while for others, like gold, this ratio is quite low. Unlike the Indian Rupee, stocks, and bonds, gold has maintained its value throughout bygone years. In fact, gold was able to generate positive returns for investors, even when the inflation rates exceeded interest rates.
In India, gold has brought unmatched returns to its investors, gaining almost 90% over the last five years. Thus, the long-term value of gold makes it the perfect asset to combine risk reduction goals with wealth creation.
Liquidity Benefits
Unlike other forms of investment, gold holds a high liquidity ratio. In other words, you can sell the asset as easily as you can buy it. From selling the asset to a local jewellery store to finding an online dealer, there are multiple options while selling gold.
Thus, if you need immediate funds, gold is the safest asset you can rely on. Selling property, collectibles, or even stocks might take longer than selling gold. Since gold has a history of holding its value, you will always find willing buyers for the asset. This liquidity benefit has kept the demand for the asset high, impacting gold rates in Hyderabad, Bangalore, Mumbai, and other cities.
Ways to Invest in Gold
If you’ve been checking out gold rates in Bangalore or Kolkata, you’ll be happy to know that are multiple avenues to start investing:
Physical Gold
Buying physical gold is the oldest route. You have options for buying gold bars and coins in this category. However, buying gold jewellery for investment is not a good option because the resale value of the gold may be lower due to the impurities present. Moreover, you would lose out on your making charges.
Digital Gold
In the digitised world, buying digital gold is much easier and preserves the true value of the yellow metal. You can buy digital gold through an exchange much like stocks and hold it in a Demat account. You can also opt for digital gold plans that allow you to buy pure gold in fractions for as little as ₹5.
Gold ETFs
You can also go the Exchange Traded Commodity (ETF) way and buy gold ETFs listed on the Indian stock market. Since these ETFs have no entry and exit load charges, you can enjoy the same liquidity benefits as with physical gold.
Gold Mutual Funds
Alternatively, you can invest in gold mutual funds. These mutual funds spread their investment across asset classes like gold ETFs and physical gold to directly invest in gold mining and distribution companies. You can also start a SIP to begin your gold mutual fund journey.
The Bottom Line
While gold has a good track record, like all investment vehicles, it is not immune to certain risks. Since the precious yellow metal is used as an inflation hedge, market speculations can impact gold rates in Bangalore, Delhi, and other Indian cities. Thus, gold investments can churn out low or negative returns in the short term.
Nonetheless, gold’s ability to beat market pressures during geopolitical crises, currency devaluations, and inflation remains unquestioned. Thus, if you’re an investor looking to infuse liquidity and protect your portfolio from complete devaluation due to market volatility, gold is a promising option. Just remember that if you’re investing in gold, doing it for the long run pays off better.
