Why Sovereign Gold Bonds are a Must-Have in Your Portfolio: Unlocking Their Value as an Asset Class

Throughout history, gold has held significant value as a precious commodity, widely used in trade and commerce. Its rarity, aesthetic appeal, and ability to serve as a safe haven asset make it a sought-after investment option for those seeking to protect their wealth against economic uncertainty, inflation, and currency fluctuations. As a result, investing in gold has become a popular choice for portfolio diversification.

However, it's worth exploring the advantages and disadvantages of investing in gold as an asset class.

Benefits of Investing in Gold

  • Inflation Hedge: Throughout history, gold has proven to be a reliable hedge against inflation. As the value of currency declines, gold prices tend to rise, which can help investors protect their wealth from the effects of inflation.
  • Portfolio Diversification: Adding gold to a portfolio can help diversify it, reducing overall risk and providing a hedge against stock market volatility and economic uncertainty.
  • Safe Haven Asset: In times of economic crisis or geopolitical uncertainty, gold is often seen as a safe haven asset that can provide stability to investors' portfolios and protect their wealth.
  • Tangible Asset: Gold is a physical asset that investors can hold, making it a popular choice for those who prefer to invest in something they can see and touch, rather than purely financial instruments like stocks or bonds

Historical Price Trend of Gold

Gold prices in India have been subject to fluctuations over the years due to a variety of economic, political, and global factors. Here is some historical data on the average annual price of 24 karat gold in India since 1947.

(i) 1947: Rs. 88.62/10 grams
(ii) 1950: Rs. 111.70/10 grams
(iii) 1960: Rs. 119.63/10 grams
(iv) 1970: Rs. 184.27/10 grams
(v) 1980: Rs. 3,140.00/10 grams
(vi) 1990: Rs. 3,200.00/10 grams
(vii) 2000: Rs. 4,400.00/10 grams
(viii) 2010: Rs. 18,500.00/10 grams
(ix) 2020: Rs. 48,651.00/10 grams
(x) April 2023: Rs. 62,000.00/10 grams

Note that the figures provided are approximations representing the average annual price of gold in India for each respective decade. The actual price of gold can fluctuate significantly due to various factors, such as global economic conditions, inflation rates, government policies, geopolitical events, and so on.

Why Sovereign Gold Bonds (SGBs) are the Best Way to Invest in Gold

Sovereign gold bonds (SGBs) offer several advantages over physical gold as an investment option. Here are some of the benefits of investing in SGBs:

  • Income Generation: Physical gold doesn't generate any income, whereas SGBs offer a fixed interest rate of 2.5% to investors. This makes SGBs a better option than physical gold in terms of generating income.
  • Storage Costs: Physical gold requires physical storage, which can add additional costs to the investment. SGBs, on the other hand, don't require physical storage and can be held electronically in the investor's Demat account, which is a convenient and cost-effective way of investing in gold. Thus, SGBs are better than physical gold in terms of storage costs.
  • Liquidity: Physical gold is less liquid than SGBs, which can make it difficult to sell quickly if needed. SGBs are highly liquid assets and can be easily traded on the stock exchange. Thus, SGBs are better than physical gold in terms of liquidity as well.
You can also read on Company website  - Click here

Comments

Post a Comment