Should You Even Consider Gold as an Investment?

For most of us, buying gold is almost a ritual. Depending on which part of the country we belong to, there is at least one day on our cultural calendar, when our parents go out and buy gold. 

It’s mostly so because gold has always been seen as the safest investment for most middle-class households. It’s been so for thousands of years, and even recently, when gold was on a bull run for over 12 years, the trend compounded our belief.

But 2015 is not a good year for investing in gold. 

Gold prices are on a downward spiral. In global markets, they are at five-year lows and are expected to slide further by the end of this year. In Indian markets, gold prices are down by almost 20% since the highs of 2012.

Goldman Sachs, one of the leading investment banks of the world, predicts gold prices to slide by another 10% before the end of this year.

We know that gold has lost its sheen when traditional countries like India and China, who hold gold in high cultural regard and have been the two largest consumers of gold, have started showing a decline in demand. 

Indians bought 25% lesser gold in 2015 as compared to the same period in 2014.

What makes things a little more sucky for us is that we have to pay more per unit of gold than what our friends globally have to. Yeah, all thanks to a 10% duty that Indian government charges on all gold that is imported in India. If you’re wondering if that duty is going to go away soon, a quick look at our current account deficits will tell you that the duty is here to stay for a long long time. 

The smarter investors amongst us saw this trend and stopped buying gold three years back. They chose other options to invest their surplus.

If you had invested 1,000 rupees in gold three years ago, it would have reduced to about 820 in 2015. You would have lost money, that too quite a bit. That money, when invested in a 3 year FD, would have become 1,300 rupees. And if you had invested it in a basket of top-rated equity mutual funds, you would have had 1950 rupees. 

Seeing these numbers, why would you ever go for Gold today?

There’s one reason we can think of. With wedding season coming up and gold prices going down, it’s cheaper now to buy that exquisite piece of gold jewelry for your friends and family. 

For any reason other than this, don’t invest in Gold.