Worth Its Weight in… Gold, Literally!
Gold - A metal that has been adored and traded for centuries. But have you ever wondered why it’s so valuable? What makes it so resilient against time, trends, and financial market crashes?
Let’s rewind a little bit!
Gold was first recognised as a currency around 700 BC in the Kingdom of Lydia. Think about it, a society using Gold not just as a pretty object but as something that could be exchanged for goods and services. Since then, this obsession with gold has continued for centuries and we have mined over 200,000 tonnes of gold. Most of this was discovered after the California gold rush of 1849.
And even though the gold standard was dropped in 1971, the world’s outlook on gold never really changed.
See, Gold has some unique traits. It’s rare, resistant to corrosion, and incredibly malleable. These unique features made it perfect for coins, jewellery and trade during ancient times. But it is also finite in nature which means its supply is limited. All these unique properties have given gold a reputation as a store of value.
But, have you ever noticed how gold thrives when the stock market is down? This is not a coincidence. Investors perceive gold as a safe haven during market downturns. This does not just happen in India but across economies and signifies the global appeal of gold as an asset.
But where is all of the Gold in the world?
As data suggests, 45% of the world’s gold is converted into jewellery. Another 22% is in the form of bars and coins while the central banks are sitting on 17% of the gold reserves. The remainder 15% is used to make phones and and other tech since gold is also a good conductor of electricity.
Now, let’s talk numbers. In 1964, Rs 63.25 would get you 10 grams of 24-karat gold. Today? That same amount of gold costs an astonishing Rs 80,595! Yup, that’s right! This massive jump in value reflects the importance gold has in our world economy.
How to Invest in Gold in India?
In India, there are several ways of investing in gold beyond buying physical gold coins and jewellery:
- Physical Gold: This is the classic one - gold in hand, literally.
- Digital Gold: Modern, convenient, and backed by actual 24-karat gold.
- Gold Sovereign Bonds: Issued by the RBI with annual interest. A win-win situation!
- Gold Mutual Funds: A diversified way of investing in gold-related assets.
- Gold ETFs: Traded like equities, these are easy to buy and sell on the stock exchange.
How Gold’s value has evolved is simple economics. Global demand, geopolitics, and market conditions play a huge role. And in India, we have our own factors at play.
Festivals like Dhanteras and the wedding season in India contribute to gold prices soaring every year as the demand for gold skyrockets. It’s a cultural thing that affects the market every year.
So what does the Golden future hold? To start with, Gold isn’t going anywhere. If anything, its status will only grow. From an investment perspective, it will remain attractive because of its potential to stay strong during tough times.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.
