Gold – A glittering investment option
Gold as an investment option has its roots in the usage as a medium of exchange for hundreds of years till fiat currency system replacing gold standard. Over the period, gold has become a glittering investment option. Though gold is basically a commodity, it behaves more like a currency. Today, gold is a globally accepted monetary asset and an alternative investment option. Gold price reflects the global economic sentiments. During economic crisis its price shoots up and acts as a safe investment haven. This article gives a quick overview on price fluctuation of gold and the various avenues available for investment in gold. (Please click and read, Gold as an investment option – A brief introduction)
Why does the price of gold keep on increasing?
In economic terms, gold is a commodity and the price of any commodity changes according to supply and demand. Gold finds application in many growing fields like electronics, nanotechnology, medicine, spacecrafts etc. However, the number of gold mines being limited, the production of gold is not enough to satisfy the demand. Historically, gold has been considered as an alternative to money because of the increasing demand, easiness to convert to currency, price rise and linkage to monetary systems. For these reasons, gold is often treated as the best investment option for facing periods of economic crisis and slowdowns during which stock markets become volatile. The ability of gold to retain its purchasing power parity is proven time and again. The rich considers gold as a medium to safe guard their wealth. Countries and central banks buy gold as a reserve to tide over turbulent times.
How does gold work as an investment option in India?
The ever increasing spent for purchase of gold in India is a clear indication of its importance in the country’s culture. The price of gold ornaments includes the cost of the gold and the charges for crafting them (called “making charges”). However, at the time of selling, the seller receives only the value of gold and this can result in loses too. Hence, ornaments purchased cannot be considered as a pure investment. But, it carries some qualities of investments too like easy liquidity, availability of alternate routes like pledge for raising short term money etc. There are better gold linked investment options. Prior to analysing the gold as an investment option, let us analyse the trends in movement of gold price.
Historical gold rate movement in India
| Sl No. | Year | Price for 10 grams of gold (24 carat) | Sl No. | Year | Price for 10 grams of gold (24 carat) |
| 1 | 1964 | Rs. 63 | 16 | 2008 | Rs. 12,125 |
| 2 | 1970 | Rs. 184 | 17 | 2009 | Rs. 15,105 |
| 3 | 1975 | Rs. 540 | 18 | 2010 | Rs. 16,150 |
| 4 | 1980 | Rs. 1,330 | 19 | 2011 | Rs. 20,391 |
| 5 | 1985 | Rs. 2,130 | 20 | 2012 | Rs. 28,400 |
| 6 | 1990 | Rs. 3,200 | 21 | 2013 | Rs. 29,411 |
| 7 | 1995 | Rs. 4,680 | 22 | 2014 | Rs. 28,510 |
| 8 | 2000 | Rs. 4,395 | 23 | 2015 | Rs. 26,340 |
| 9 | 2001 | Rs. 4,410 | 24 | 2016 | Rs.28,623 |
| 10 | 2002 | Rs. 5,020 | 25 | 2017 | Rs.29,670 |
| 11 | 2003 | Rs. 5,020 | 26 | 2018 | Rs. 31,440 |
| 12 | 2004 | Rs. 6,005 | 27 | 2019 | Rs. 35,220 |
| 13 | 2005 | Rs. 6,165 | |||
| 14 | 2006 | Rs. 8,210 | |||
| 15 | 2007 | Rs. 9,250 |
*The price mentioned above is an average price during the year. The price fluctuated during the year
The gold price chart indicates an increasing trend in gold price, giving support to its credentials as an investment option.
Gold investment options available in India
Investments in India in Gold happen in different forms. They are:
Jewellery, gold bars and coins
Gold Exchange Traded Funds (ETF)
Gold Fund of Funds (Gold FoFs)
Gold deposits with Banks
Sovereign Gold Bonds (SGB)
