A very Happy Akshaya Tritiya to all. On this auspicious day, let’s discuss the role Gold has in our life and wealth portfolio in general.
We Indians have continuously shown faith in gold as far as investments are concerned particularly because the Yellow metal has traditionally served as a shock absorber in challenging economic times and continues to do so even now. From pandemic when the equity yield were abysmally low and interest rate risk in debt segment was high, to current times when a new geopolitical crisis in the form of Russia-Ukraine conflict made world economies unstable, Gold has shined constantly as investors tried to counter economic pressures.
Inflationary pressure is not expected to come down soon which will lead to underperformance of equity assets and diversion of funds to Gold assets. Thus, Gold ETFs which have given 17% annualised return in the last 3 years are expected to shine further.
Gold investments are not being done just by the HNIs and boomers but also the youth. Millennials have seen Gold as the first form of investment at home and are motivated to invest their savings as well in Gold. Apart from these factors, investing in gold has gained more traction among millennials due to its stability, high liquidity and high demand. In fact, as per a research by World Gold Council, more than 19% millennials in India are interested in purchasing Gold.
Storing physical Gold is difficult and there is trust deficit between buyers and sellers and that is encouraging the youth to invest more and more in Digital gold available in the form of Sovereign gold bonds (SGB), Gold ETFs and Gold mutual funds.
Though Digital Gold consumption in India is much lower than physical Gold (<5% of consumption annually is digital), it is gaining traction really fast. From Jan’18 to Jan’22, the AUM of Gold ETFs has grown ~4x. Further, government has sold more than 30K crores of SGB till date.
Gold ETFs have provided high returns in the past - 9.5% (1 year), 17% (3 years) and 11% (5 years) annualized returns. SGBs provide further higher returns as they have a fixed 2.5% interest rate along with the increment in Gold prices being passed to the investor
Gold is a separate investment class and investing in Gold helps in diversifying the existing portfolio
Whenever inflationary pressures become high, Gold, being a commodity, increases in value and hence is considered as a good shield against Inflation
As discussed above, Gold has proved itself to be a risk-absorber and has shined even when pandemic or geo-political crisis happened. Thus, it must be a part of a healthy portfolio
Gold is an important part of the Indian culture and is the most popular choice in weddings. Youth must consider future plans while planning current investments in Gold
With multiple options, handsome returns, and stable ROI, gold continues to woo the new-age investors and holds a promising future for youngsters.
- Physical Gold
- Gold ETFs
- Digital Gold
- I don’t invest in Gold