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A match made in heaven: Indians and Gold

A match made in heaven: Indians and Gold
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Indians love spending money on shiny trinkets, can Gold play a role in growing wealth?  Click To Tweet

For centuries, gold has captivated the hearts and wallets of people all around the world, and India is no exception. But why is it that Indians seem to have an extra special love affair with this precious metal? And what kind of economic impact does it have on the country?

For starters, gold has been an integral part of Indian culture for as long as anyone can remember. From weddings to festivals to religious ceremonies, it’s hard to imagine any occasion where gold doesn’t play a starring role. Apart from its cultural integration, gold is also considered a wise investment in India. 

While tradition may explain some of the appeals of gold, the scale of modern gold purchases is truly remarkable. To illustrate this point, consider that in 1982, India consumed a mere 65 tonnes of gold, highlighting the significant growth in demand in recent times.

Why is Gold in the news? 

The price of gold has surged to a historic high of over Rs. 60,000 for 10 grams in India, while globally, the rate of gold has recently dropped by approximately 2% following a peak of $2,010 per ounce over a 52-week period. Analysts attribute the decline to profit-taking by short-term traders and a sense of caution in anticipation of the US Federal Reserve’s upcoming statement regarding a potential interest rate increase and its stance on the ongoing banking crisis.

Did you know? It is rarer to find a one-ounce nugget of gold than a five-carat diamond. Click To Tweet

How can you invest in gold? 

Gold investments can be made in many forms like buying jewellery, bars, coins, gold ETFs, gold funds, bonds etc. There are modern and conventional ways of investing in gold. Conventionally, gold investment can look like buying physical gold, whereas investors nowadays are flocking towards options like gold ETF and gold funds.

Investment TypePhysical GoldGold ETFsGold Funds
DefinitionPhysical bullion or coins owned by an investorShares in a gold-tracking exchange-traded fundShares in a gold-tracking mutual fund
LiquidityCan be sold quickly, but may be subject to market conditionsCan be sold quickly during market hoursCan be sold quickly during market hours
StorageRequires secure storage, may incur additional costsNo storage necessaryNo storage necessary
Potential ReturnsPotential for price appreciation and possible collectable valueTracks gold price, the potential for price appreciationTracks gold price, the potential for price appreciation
Expense RatioNone, except for storage costsVaries by ETF, generally lower than mutual fundsVaries by the fund, generally higher than ETFs
Minimum InvestmentVaries by the dealer, and may be higher than ETF or mutual fundShares can be purchased in small amountsShares can be purchased in small amounts
Counterparty RiskNone, since the investor owns physical goldMinimal, but exists due to the need for custodian and management feesMinimal, but exists due to management fees and underlying derivatives
AccessibilityEasy to purchase, no investment account necessaryRequires a brokerage accountRequires a brokerage account or investment account

New opportunities for investing in gold 

Investing in gold is made easy by gold ETFs, bonds and funds. What are the different ways you could invest in gold? 

The Indian government has even introduced gold bonds as a way for individuals to invest in gold without actually owning physical gold. These bonds are issued by the Reserve Bank of India and can be purchased by individuals or institutions. The bonds offer a fixed interest rate and are redeemable in cash upon maturity, making them a convenient and low-risk way to invest in gold.

In conclusion, it’s clear that gold has a special place in the hearts of Indians, and for a good reason. Considered a safe and stable investment option, it has weathered economic storms and market fluctuations for centuries. And with the introduction of new investment options like gold ETFs, funds, and bonds, investing in gold has never been easier.

Explore the Equity and Gold smallcase and you can tap into the growth potential of the stock market while also enjoying the stability and security of gold. 

Equity & Gold by Windmill Cpaital

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A match made in heaven: Indians and Gold
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