Gold investment: A safe bet amid skyrocketing inflation, global slowdown concerns?

Gold investment in India: Traditionally, investment in gold is considered a safe bet to limit risks. Investors in gold consider it a hedge to beat inflation amid global slowdown concerns. Its prices rally during a high inflationary economic scenario. 

However, there are counter agreements too. Has the gold turned old against inflation? This question pops up as its prices are range bound when the inflation is going up globally. So, is gold still considered a hedge against inflation this time around due to global slowdown situation. 

Let's have a quick look at the returns gold in the last 10 years

Year                                                             Price (24 karat per 10 grams)

2010                                                            Rs 18,500

2020                                                            Rs 48,651

The yellow metal has appreciated by nearly 160 per cent in the last decade. In 2010, gold was being sold at the rate of Rs 18,500 per 10 grams. The value of the same in 2020, touched Rs 48,651. Going by the figures, it can argued that the investment in gold could be considered as an alternative to hedge against inflation.

Lower volatility than equity investments

In addition to the returns it offers, gold has traditionally demonstrated lower volatility than equity investments over the long term, which is a major justification for using it as a hedge. 

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Gold investment amid high inflation 

When the Ukraine crisis started, the gold prices spiked. However, they declined later after the February-March high. Sovereign gold bonds outperform other gold investments for this reason. Over and above the rise in metal price, the investor receives an additional 2.5% interest per year.  Sovereign gold bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Gold has been traditionally one of the safest modes of investment in India, however, there are other options other than the physical gold that you might want to invest in. 

Sharing her thoughts, Mrs. Sheetal Ranka from Rare Jewels - A Ranka Legacy said, “As we are welcoming the biggest festival of India and with the diversity, considering Indian culture celebrating this festival is different fashion. But the one thing that is common in us is whenever there is any festival first thing, we think about spending on gold. Gold as an investment can be related to various factors like individual emotions, attachment to the asset class, conservative risk profile, cultural importance, etc."

“It is suggested to include Gold Mutual Fund, Gold ETF, and Sovereign Gold Bonds for portfolio diversification and to average out the portfolio performance in times of economic crisis. Physical gold can be part of personal consumption, but from an investment avenue, one should consider the options mentioned above," she added. 

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