It was a nice, cool morning and the golden rays of the sun were bouncing off the dew droplets on the grass blades.
“Arun, you see this natural Gold all around you? Reminds me of how majestic Gold looks when worn during parties in the evenings. By the way, why haven’t you talked about Gold investments so far?” asked Sheela.
Arun smiled and replied, “Sheela. I’ve been anticipating this question from you for ages now!! OK, Just tell me what you think about Gold as an investment.”
“I think it is one of the most sensible investments. I have seen Gold only going up over the years in value. Our ancestors also kept all their monies converted to Gold since it is a woman’s, even a man’s, best friend. Anything can happen to your money – see the recent demonetisation. But nobody can ever say that your Gold will be called ‘Iron’ from tomorrow!” chuckled Sheela.
“Sheela, perceptions can be so wrong. Do you know that gold prices had peaked in Aug 2013 when they reached Rs 34,953 per 10 grams in India and have been on a decline since then? Actually they had peaked in Aug 2012 internationally and had started declining but because the Indian Rupee itself had lost its value, declining Gold prices did not hit Indian shores till a year later”, Arun reasoned.
“Do you mean to say that anybody who bought Gold three years back has actually lost money?” Sheela was not convinced.
“The price movement is there for all to see. Sheela, I say – ‘Gold zooms when the world is doomed and vice versa’! Just see yourself, you will find Gold doing well only when the world’s economies go into doldrums. For example, Gold prices started going up after the 11 Sep 2001 (9/11) Twin-tower attack in USA and really zoomed after the 2008 financial sub-prime crisis all over the world. But the moment economies round the world started recovering from 2012 onwards, all those trillions of Dollars that went into Gold earlier, came right out and got into productive assets like equity.” Arun explained.

“You see, there are Trillions of Dollars of billionaires, hedge funds, pension managers etc floating like a big cloud all over the world, looking for the right opportunity and the best place to park themselves to earn that extra percentage returns. When the world is fearful, this money goes into safe investments like Gold and Govt Bonds, but when the economic outlook becomes good, it goes into stocks and similar earning avenues”, Arun continued.

Sheela was still not ready to give up. “Arun, do you mean to say that I should sell off my ornaments and gold coins bought over years just because the world has started doing well now? No way, I’m not going to think of doing that even for a moment!”

Arun laughed and said, “I’m not suggesting that, Sheela. Whatever I’ve said is applicable only to the Gold bought as an investment and not the Gold you’ve bought for personal use. But please remember that Gold is actually one of the most worthless metals. It barely finds any productive use anywhere, unlike Silver, Copper and even Tin. In fact, its value is only in the ‘eyes of the beholder’ as they say – on its own, Gold is useless for human beings”.
Arun continued, “But if you have to buy Gold for whatever reason other than for immediate personal use jewelry, I would recommend everybody to go in for either Gold ETF (Exchange Traded Funds) which are traded on stock exchanges like a stock or the Gold Mutual Funds. The latter are slightly more expensive than ETF by about 0.5% but you get the facility of buying them systematically through SIP where you can buy Gold starting from as low as Rs 100 per month automatically. Taking this non-physical route, you do not have to worry about purity, getting the right rate (as they are pegged to central rates), selling or buying hassles and there’s no problem of safe-keeping your holdings too. So, if you have to save up for Gold for your daughter’s wedding say some years later, use Gold ETF or Gold mutual funds rather than buying Gold jewelry or coins.”

“That part I agree with you Arun. My biggest worry while buying Gold jewelry is not to get cheated on price, purity and weight”, agreed Sheela.
“And if you do decide to buy Gold as an investment, remember, it is not a hedge against inflation, as some people incorrectly believe. Gold is a hedge against political stupidity, due to which economies go into tail spin!!” chuckled Arun and gave out a hearty laugh.