Ever wondered how rich one could get if there was gold available for investment? For centuries, gold has held a captivating allure.
It’s adorned royalty, symbolised wealth, and served as a cornerstone of global economies.
In India, its significance transcends mere economics; it’s deeply woven into our cultural fabric, cherished during weddings, festivals, and passed down through generations.
Recently, this timeless asset made headlines yet again, crossing the significant milestone of ₹1 Lakh per 10 grams in the Indian retail market (including GST) and on certain futures contracts, as reported around April 22, 2025.
As per highly experienced investor and advisor Someshwar Srivastava, this record surge, fuelled by a cocktail of global economic uncertainty, geopolitical tensions, a weakening US dollar, and central bank buying, has reignited conversations about gold’s role in modern investment portfolios.
But beyond the headlines and the shimmering appeal, why is investing in gold still considered a prudent practice?
Let’s delve into the enduring value of this precious metal.
Why Invest in Gold?
Gold’s reputation as a sound investment isn’t built on fleeting trends. It stems from several core attributes:
- Historical Store of Value: Unlike fiat currencies, which can be devalued by inflation or government policies, gold possesses intrinsic value. Throughout history, it has consistently retained purchasing power over long periods, acting as a reliable store of wealth.
- Safe Haven Asset: In times of economic turmoil, market volatility, or geopolitical instability (like the recent US-China trade tensions or concerns around Federal Reserve policies cited in recent reports), investors often flock to gold. It’s perceived as a ‘safe harbour,’ preserving capital when other assets like stocks or bonds might be declining. Its performance during the 2008 financial crisis and the COVID-19 pandemic underscores this characteristic.
- Hedge Against Inflation: When the cost of living rises and the value of currency erodes (inflation), gold prices often tend to increase. This makes it an effective tool to protect your wealth against the corrosive effects of inflation over the long term.
- Portfolio Diversification: Gold often exhibits a low or even negative correlation with traditional asset classes like equities and bonds. This means its price movements don’t necessarily mirror the stock market. Including gold in your portfolio can help reduce overall risk and provide stability, especially during market downturns.
- Cultural Significance: Particularly in India, owning gold is synonymous with prosperity and security. This deep-rooted cultural affinity ensures consistent domestic demand, especially during festive and wedding seasons.
The Pros and Cons of Gold Investment
Like any investment, gold comes with its own set of advantages and disadvantages:
Pros:
- Liquidity: Gold is highly liquid. Whether in the form of bars, coins, or even jewellery (though less ideal for pure investment), it can be relatively easily converted into cash almost anywhere in the world. Digital forms like ETFs are even more liquid.
- Tangibility (Physical Gold): Owning physical gold provides a sense of security for some investors – it’s an asset you can hold.
- Universal Acceptance: Gold is recognized and valued globally, transcending borders and currencies.
- Diversification Benefits: As mentioned, its low correlation with other assets makes it an excellent diversification tool.
Cons:
- No Passive Income: Unlike stocks (dividends) or bonds (interest), gold doesn’t generate regular income. Returns solely depend on price appreciation.
- Storage and Security Costs (Physical Gold): Storing physical gold safely involves costs (bank lockers) and carries the risk of theft or damage. Purity can also be a concern.
- Price Volatility: While a long-term store of value, gold prices can be volatile in the short term, influenced by factors like interest rates, currency movements, and market sentiment. Recent sharp rallies highlight this potential for fluctuation.
- Opportunity Cost: During strong bull runs in the equity market, gold’s returns might lag behind stocks over certain periods.
- Transaction Costs: Buying physical gold, especially jewellery, involves making charges. Even ETFs and Mutual Funds have management fees and brokerage costs.
Future Predictions
Following the recent price surge, experts remain broadly optimistic, albeit cautious, about gold’s future. Several factors support a continued bullish outlook into 2025 and potentially FY26:
- Persistent Global Uncertainty: Ongoing geopolitical tensions and economic concerns continue to bolster gold’s safe-haven appeal.
- Central Bank Buying: Central banks globally, including the RBI, have been increasing their gold reserves (‘de-dollarisation’), providing consistent demand.
- Potential US Fed Rate Cuts: Expectations of interest rate cuts by the US Federal Reserve tend to make non-yielding assets like gold more attractive compared to interest-bearing investments like bonds.
- Weakening US Dollar: A weaker dollar generally makes gold cheaper for buyers using other currencies, potentially boosting demand.
Forecasts vary, but many analysts see potential for further gains.
Some predict prices reaching ₹85,000 – ₹91,000 per 10 grams or even higher (with some revised forecasts touching ₹1,12,000) by the end of 2025 or FY26.
Goldman Sachs has issued particularly bullish forecasts, predicting gold could reach $3,700/oz (a 41% gain from Jan 1, 2025 levels) or even $4,500/oz (a potential 71% gain) by the end of 2025 under certain scenarios.
However, seasoned veterans like Someshwar Srivastava advise caution. The recent rally has been sharp, and volatility remains a key risk.
Many suggest approaching new investments strategically, perhaps buying on price dips rather than chasing all-time highs.
The Feasibility Factor
Despite the cons and volatility, gold remains a highly feasible investment for Indians, thanks to the variety of ways to invest:
- Physical Gold (Jewellery, Coins, Bars): The traditional method. Best for cultural purposes or those who prefer tangible assets. Be mindful of making charges, purity (look for BIS hallmark), and storage.
- Gold ETFs (Exchange Traded Funds): Units representing physical gold, traded on stock exchanges like shares. Offer liquidity, transparency, lower costs than physical gold (no making charges), and eliminate storage hassles. Requires a Demat account.
- Gold Mutual Funds: These funds primarily invest in Gold ETFs. Offer convenience, professional management, and allow investment via Systematic Investment Plans (SIPs). Suitable for those without a Demat account or preferring the MF route.
- Sovereign Gold Bonds (SGBs): Issued by the RBI on behalf of the Government. Denominated in grams of gold. Offer a fixed interest rate (currently 2.5% p.a.) on the investment amount, paid semi-annually, in addition to capital appreciation linked to gold prices. Capital gains on redemption are tax-exempt for individuals. Have an 8-year tenure with exit options from the 5th year. Considered very safe and tax-efficient.
- Digital Gold: Allows buying gold online through various platforms, starting from very small amounts (even ₹1). Gold is stored in insured vaults on your behalf. Offers convenience but currently lacks a dedicated regulatory framework like SEBI for ETFs or MFs.
Conclusion
Gold’s recent surge past ₹1 Lakh is a testament to its enduring appeal in uncertain times.
While it might not offer the explosive growth potential of equities in the short term, its historical resilience, diversification benefits, and role as a hedge against inflation and crisis make it a valuable strategic asset.
Investing in gold shouldn’t be an ‘all-or-nothing’ approach. It’s about balance.
Financial advisors like Someshwar Srivastava often suggest allocating a portion (typically 5-15%) of your portfolio to gold, depending on your age, risk tolerance, and overall financial goals.
Whether through SGBs for tax efficiency and interest, ETFs for liquidity, or physical gold for tradition, incorporating the yellow metal can add a layer of stability and protection to your long-term investment journey.
As the Indian household has long known, and as even seasoned bankers like Someshwar Srivastava have acknowledged, holding gold can indeed be a smart move.
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