Why Gold Matters
Business Today|September 20, 2020
Why Gold Matters
ECONOMIC UNCERTAINTY ACROSS THE GLOBE HAS INCREASED THE APPEAL OF THE YELLOW METAL AMONG INVESTORS. THIS MAKES IT A GOOD STORE OF VALUE IN THE NEAR FUTURE
P.B. JAYAKUMAR

Dharmesh Solkar, a Mumbai-based middle-level IT professional, decided to go for a week-long summer vacation to the Maldives when he got promoted in November last year. He and his wife Surabhi, a home maker, had been planning the trip for years. They had to cancel due to the Covid-19 outbreak.

Soon, he started worrying about the future when he heard about jobs cuts across sectors. In 12 years of his working life, he had saved little. The ₹2 lakh he had set aside for the trip was lying in his savings account when he got a call from a jewellery chain’s executive, who gave him gold price data from as far back as 1923 to March 31, 2020. “Since 1925, when a sovereign of eight grams was priced at ₹13.75, prices never went down till 2014,” he said. As Solkar saw prices hit historic highs of ₹54,000plus per 10 gm this year, he thought he had missed the bus. But a few days later, the relationship manager mentioned the ‘Independence Day Freedom Offer’, a discount of nearly ₹3,000 for eight grams, for purchases on August 15. Dharmesh bought a small diamond gold chain for his wife.

While Covid-19 has ruined businesses around the globe, including the gems and jewellery business, the yellow metal is still shining as a key instrument for creating wealth, even as the industry is still undergoing Covid-19 turbulence. Consider this: Gold has been the best investment in the past five years and returned 17.7 per cent per year, far ahead of equities, which have returned 7-8 per cent, and even real estate, which has returned a mere 5.3 per cent per year during the period. With economic uncertainty worsening across the globe, investors will increasingly add gold in their portfolio for safety. A weakening dollar (also considered a safe haven) is also good for gold. Industry experts say the yellow metal will remain a preferred investment in future as well.

Wealth in Crisis

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September 20, 2020