2. Gold Investment - PROS
Safety
Safety of knowing that the price is going to steadily rise
over time.
3. Inflation Hedge
Over time, the purchasing power of the dollar declines, but the average value of the gold rises.
The rise in gold prices is far greater than inflation rates.
1990
=
$150,000 392 ounces
$383 per troy ounce
=
2010
$220,000
$1118 per troy ounce
197 ounces
4. Simplicity of the Investment
Easy to buy: Investors in India can buy Gold Coins from Post offices and banks in India.
Easy to store: Bank lockers, Airport lockers, Private lockers
Hassle free investment: No need to keep a record of share market or infrastructure or
annual reports
5. Hedge Against Market Crashes
a market crash like the one we saw in 2008 is something that would devastate your
investment portfolio if your only investments were stocks, bonds and mutual funds.
However, someone who put a substantial portion of their long-term investment money
in physical gold would not have as much to fear from a financial crisis or global markets
meltdown.
In fact, the price of gold often goes up during such periods, because more people turn
to such physical investments as they lose their faith in the financial markets.
6. Demand for Gold is Rising
As the world’s population continues to grow, and many third and second world
economies begin to show their financial muscle, the demand for gold is continuing
to rise at sharp rates.
7. Tangible asset
Gold is one of the few assets that is tangible, and thus, it creates a perception of
safety among investors. Purchasing gold is much easier compared to purchasing
other tangible assets such as real estate. Also, because of this feature, while assets
stored digitally are prone to hacking and other misuse, gold is free from such
concerns
8. Investment portfolio diversification
The key to diversification is finding investments that are not closely correlated to one
another; gold has historically had a negative correlation to stocks and other financial
instruments. Recent history bears this out:
● The 1970s was great for gold, but terrible for stocks.
● The 1980s and 1990s were wonderful for stocks, but horrible for gold.
● 2008 saw stocks drop substantially as consumers migrated to gold.
9. Gold Investment - CONS
No steady income
Gold is an asset which fails to give any regular income, on the other hand
investments made in mutual funds, real estate and stocks would pay you
dividends and rents.
10. Price dictated by international markets
Indian gold prices are influenced by the international market.
Any major movements internationally will impact Indian prices
as well. Dollar plays a vital role in gold prices.
