Is Gold Still a Fundamental Investment Option?

Is Gold Still a Fundamental Investment Option?

Looking back, almost everything was traded as gold when there was no paper money. So when currency came into existence, the foundation of it was laid by gold.

India is one of the top countries from a gold consumption perspective. Gold is also a lifestyle product when it is useful for children's weddings, mortgages, loans, jewellery, etc.

How did gold even become an investment device?

Money in this world was then pegged to gold reserves. Today with stocks and crypto-currencies coming into play, gold still seems to be a safer and a good-return investment asset.

The other thing that really works for gold, especially in India, is that it is not just an investment asset but has various other uses.

The earlier gold investment was more of investing in physical gold and safekeeping gold jewellery.

There are these natural limitations and risks to how much physical gold one can accumulate and store safely without getting robbed.

Secondly, one can not divide physical gold into fractions for investment flexibility.

Thirdly, purity always has a question mark to it. Making charges is the fourth limitation that puts physical gold investment at a disadvantage.

To make up for these, digital gold investment came into the picture.

Value of Gold today

With the current situation of a stock market crash, crypto-currency downfall, booming inflation rates, petrol prices, and increasing tax rates imposed on any and all goods, gold investment is steadily thriving for a change.

Primarily because of the war situation between Russia and Ukraine, as the peace efforts between the two countries are floundering, gold is prospering.

"Gold prices have continued on an upwards journey for the second consecutive week, thriving due to the ongoing Russia-Ukraine conflict, as the peace efforts between the two countries are floundering. Apart from that, elevated inflation reports are roiling the market sentiments. The US annual CPI accelerated to 8.5 per cent in March to hit a fresh 40-year record. Wholesale prices measured by PPI came in at an 11.2 per cent annual rate. UK's March inflation print also reflected a global trend of higher inflation, wherein the headline CPI is at a 30-year high. This has led to strong buying interest in gold as investors seek inflation protection through hard assets.", said Sugandha Sachdeva, VP Commodity & Currency Research at Religare Broking Ltd.

She also added that the bump in oil and gas prices, geopolitics, and sky-high inflation rates have surprisingly polished gold's appeal.

MCX, Multi Commodity Exchange gold rate for June '22 future contract amounted to Rs 53,000 per 10 gm levels on Friday 15th.

However, it failed to sustain above this psychological level and closed at Rs 52,991 per 10 gm mark.

Spot gold price closed at $1974 per ounce levels, giving a breakout at $1970 levels on a closing basis.

The rate of gold is also affected by the market volatility and how much gold is available.

Gold buyers can choose between 22-karat, which is about 92 per cent pure or 99.999 per cent pure 24-karat gold based on their needs.

Anuj Gupta of IIFL Securities said, "Wedding season in India has begun, and it is going to work as a major domestic trigger for gold price as demand for physical gold is expected to soar during the month of April to June. Apart from this, spot gold price has given a fresh breakout at $1970 levels, and other previous triggers like the Russia-Ukraine conflict and global inflation still exist. So, I expect gold prices to further escalate to $2000 to $ 2020 per ounce levels in the international market. In contrast, in the domestic market, the precious metal may go up to ₹53,500 to ₹53,800 per 10 gm levels in the immediate short term."

He also advised long-term investors to hold on to gold, especially during times of crisis like these. The short-term investors should look to get benefits from this dip.

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