Gold is one of the oldest precious metals that has helped the human race to evolve, helped us trade, create currency, build the economy and much more. Gold continues to remain relevant and critical in many ways in the world of Economics and Finance till date.
India has a very old and deep relationship with Gold. The relationship has evolved over centuries. From being home to the deepest gold mines of the ancient world, to taking gold at its peak by making it a primary currency in 3rd to 6th century AD, and having a constant inflow of gold against trading spices & luxuries to the west till the 16th century. India has always loved gold.
In the modern day, Indians have continued to embrace the precious metal in large quantities in the form of jewelry and have formed a very emotional relationship. Indians traditionally buy a lot of gold in weddings, festivals and other spiritual or cultural occasions. Gold is also treated as a valued gift here.
With increasing household incomes and the advent of the digital revolution in the country, the average disposable household incomes have increased. People have been saving and investing in a large number of investment products. In spite of the availability instruments ranging from Bank deposits, stocks, mutual funds, bonds, crypto currencies to real estate, gold continues to get a large chunk of wallet share when it comes to savings and investments. Gold investments are taking place through a large number of instruments like Bonds, Gold leasing, ETFs and Digital Gold.
Gold as an investment
Gold has always been valuable and given 10.5%-11% annual growth rate in any long term window in the past 40 years. With numerous financial booms, and major economic downturns, gold has continued to rise on several occasions and reliably perform in a consistent manner.
There are many ways in which people invest in Gold today. All these instruments have their pros and cons, but one thing that all these instruments provide is reliable and consistent returns and helping you keep your portfolio stable.
Gold is primarily perceived as a hedging instrument that can help in beating inflation and a savior to the portfolio when the equity market takes a dip. This perception is not completely incorrect, but the perceived rate of returns are many times grossly incorrect than the actual numbers. Below are the average annual rate of returns on gold for different periods.
|Period||1 yr||3 yr||5 yr||10 yr||15 yr||20 yr||30 yr|
With the annualized rates of returns that are upwards of 12% for a very long period of time, Gold could be put ahead of most of the mutual funds and index funds that claim a rate of return in the range of 10-12%. With the security that gold provides, it could be always treated as a more preferred option for investors.
There are instruments that provide additional assured returns over and above the gold price appreciation, which changes the way you’d look at gold as an investment completely.
Do more with Gold
There are a few investment choices that give you an option to make an additional assured return over and above the 11% average annual gold price appreciation. Below are some of the instruments that you can consider.
Jewelers need gold for making jewelry in the same way that any business needs raw material or working capital. Large scale jewelry companies take gold metal through leases to be able to run their business efficiently. It is less expensive to take leased gold as compared to a Business loan in INR/Rupees and buying gold in large quantities. Gold leasing also protects them from any losses that might occur due to daily price fluctuations.
Gold leasing has always existed as an investment option available to a very limited set of people with minimum investment requirements being upwards of 500gm-1Kg. Making gold leasing accessible will give an opportunity to everyone to be able to earn extra returns on their gold.
Gold leasing programs like Gold+ by Gullak Money App have made this investment option available for every investor. User’s invested gold is leased to the most reputed, trustworthy and legacy holding jewelers in the country. Jewelers provide security in the form of Bank/Corporate guarantee to protect the investment. The jewelers pay interest in grams of gold, and that is being further passed on to the users.
Gullak provides an assured return of 5% in grams of gold (compounded every year) in addition to the historical average 11% gold price appreciation. This makes Gold+ a 16% return instrument.
Sovereign Gold Bonds
Sovereign Gold Bonds or SGBs are bonds issued by the government of India. These bonds come with a lock-in of 8 years, and are issued in the denominations of 1 gram units. These bonds are issued a few times in a year.
In addition to the gold price appreciation, SGBs provide a 2.5% simple interest every year. This interest is applicable on the INR amount invested. SGBs can be purchased on the Reserve bank of India website.
Here is a quick comparison between the two options.
|Where to find||Gullak Money App||RBI Website|
|Investment type||Physical Gold (Digital record)||Bond Paper|
|Fixed Returns||5% Compounded||2.5% Simple|
|Returns Type||Returns in gold||Cash|
|Lock-in||No lock-in||8 years lock-in|
|Withdrawal||Withdraw anytime, without penalty from the App at Market sell price||Withdrawal before 8 years – Sell in secondary market with 5-8% discount from market sell price|
|GST||One time 3% GST applicable at the time of purchase||3% GST applicable only when you want gold in physical form|
While gold is perceived as an old instrument for investment, it continues to provide reliability and higher returns. With gold leasing options like Gullak Gold+, the investors can get returns of up to 16% and beat 90% of the Mutual Funds. With instruments that can provide extra assured returns on your gold savings, you can treat gold as your primary investment instrument and not just a hedge.