Is gold a good investment in 2021?
What is the investment?
Investing involves putting money away in the hopes of receiving a profit or return in the future. To look at it another way, to invest is to purchase an asset or an item to earn money from it or benefit from the asset’s appreciation over time.
Type of investments
There are several different types of investment plans that people use, and a few of them are below:
- Exchange-traded funds
- Fixed deposit
- Mutual funds
- National Pension Scheme
- Public provided fund
- Real Estate
What is Gold?
Gold is a type of precious metal that is well-known. This introduction aims to shed light on gold’s position in the financial world as well as its other characteristics as an investment.
Gold’s worth had already been found in antiquity. Gold was used to create jewelry and money. It is a sign of prosperity, elegance, and heritage, as well as a repository of memories and cultures. Aside from these, however, gold contributes significantly to a wide variety of technologies. Gold is used in space exploration, nanoparticle manufacturing, and medicine because of its physical properties such as corrosion resistance, high malleability, and ductility. In addition, it is used as a bonding wire at the iPhone’s heart (Gold’s contribution, 2011).
Why should we invest in Gold?
Many people believe that gold is the safest investment they can make to shield themselves from stock market losses and inflation. In reality, gold’s output has historically risen during periods of high inflation.
Gold is one of the most popular commodities in which consumers invest their money for a higher return than they would get from a bank. In India, people buy gold for their children’s marriages to be held at a later date. Investment gold is best suited for fast conversion into money from banks and gold merchants in the shortest possible period. Gold’s appreciation and depreciation concerns other investment options such as fixed deposits, provident funds, foreign crude oil prices, the stock market, and mutual funds, among others. The consumer gains an advantage by comparing gold to other investment options, allowing them to clearly understand the investment trend for their hard-earned money, which is expected to yield good returns in the future.
Various Forms of Investment in Gold:
There are several different types of gold investment plans, which are described below:
- Gold coins
- Futures & options in share markets
- Bullion bars of gold
- Certification and deposit scheme in gold
- Gold Mutual Funds
Factors Affecting Gold Price
Because of the population, marriages, the beautification process, and investment options, the number of people using gold is growing in modern times. Compared to earlier periods, the price of gold has steadily increased. When demand is strong, prices will typically rise, and when demand is low, prices will typically fall. The following are the reasons for the market’s set gold price:
- Global movement
- Government gold reserves
- Festive seasons
- Interest rate trends
- Stock market
- Production costs.
Gold Price Performance
Table 1 shows some gold price trends over the last few decades. There is no conclusion or explanation, just some findings, and observations about gold price fluctuations in India. Gold has been on a bull run for the past ten years, with values multiplying several times. Gold prices have been highly volatile in recent weeks, and some experts believe more upward momentum is in jeopardy. So I looked up the gold prices for the past 86 years (1925–2011) and ran some numbers and graphs to come up with some interesting results.
Table 1: Gold prices in India from 1925-2011 (Per 10 grams)
Risks of Investing in Gold
Impurity in gold is one of the threats involved. Another issue with physical gold investment is keeping it secure from robbery, vandalism, and housebreaking, among other things. Due to these threats, investors must incur recurring costs such as hiring lockers, purchasing insurance, and so on to ensure the protection of their gold holdings. Apart from the dangers of robbery, burglary, and housebreaking, determining the genuineness and antique value of such coins and collectibles is difficult. Investors incur the production expense at the time of resale, in addition to purity and safety risks. If the issuer of a gold instrument issues the instrument without investing in gold, investors can lose money. As a result, before investing, investors can verify the issuer’s legitimacy and creditworthiness.
It isn’t a necessary product. People are unable to consume gold. Unlike stocks or real estate, where investors can reap the benefits of their investment without having to sell their assets, gold does not provide current income in the form of dividends or rental income. Aside from the buying of gold, an investor must consider how the gold will be held safely. Keeping gold coins in one’s home is akin to placing money under one’s mattress: it’s not a secure place. Secure deposit boxes (available at some banks) are used by some investors to store gold. Other investors buy gold in a way that doesn’t require them to take possession of it. Gold exchange-traded funds, for example, allow you to buy gold without having to own it.
Various avenues for investing in gold are causing uncertainty among investors in the current market scenario of high volatility and rapid change. According to various surveys, Indian households have 16,000 tons of gold, mostly in the form of jewelry. There are a variety of gold investment options available, including jewelry, coins, bullions, ETFs, mutual funds, and E-gold. According to the study, many investors also prefer to invest in jewelry, gold coins, and gold bullion bars over ETFs, futures, and options, which have a higher return and are easier to understand.
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