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returns on physical gold are generally poor. For example, if you buy gold jewelry, you may not earn as much selling it as you paid for when you bought it. Storing physical gold securely can be difficult as it is susceptible to theft. Physical gold will never be a passive, steady source of income.
In a candid interview with Abhik Bhattacharya and Md. Asghar Khan, Padma Shri Prize winner Chutni Mahato, talks about her efforts after she was branded a witch and became the savior of 140 victims of the witch hunt in Jharkhand. Physical gold is an expensive commodity in any form. Storage requires a secure location, such as a safe deposit box at home or in a bank, as there is a risk of theft, and that comes at a cost. Plus, every time you need the gold, you have to physically go and get it.
It won’t “come” to you like other financial products. Every investment is made with the aim of generating returns. In recent years, the returns on gold have been much lower than those on stocks, for example. Over the past ten years, physical gold in rupees has achieved returns at a compound annual growth rate (CAGR) of 5.7 percent, well below Nifty’s 15.5 percent.
There is no standard answer to this question. Instead, the benefits of gold depend on the investor’s personal circumstances and long-term goals. If you fall into one (or more) of the following categories, gold may be a wise investment for you. Despite what you may have read, gold is actually not a good hedge against inflation.
People who love gold say that when inflation rises, so does the price of gold. The SPDR Gold Shares ETF has an expense ratio of just 0.4%, and the iShares Gold Trust offers an even lower expense ratio of 0.25%. This is a much better and more liquid alternative than buying physical gold bars and paying a high premium above the spot price. In the last four months, however, gold has suffered an 18% drop from that high — meaning that gold is almost in a bear market at a time when it should maintain its value. If you want to benefit from the rise in the price of gold, you can invest in digital gold or paper gold through instruments such as government gold bonds (SGBs), which offer interest rates above the price of gold.
Both ETFs are at a 52-week low and are intended to replicate the price of gold by holding insured physical gold in a trust. By keeping cash on the sidelines or buying gold now, an investor is essentially saying that investing in gold is a better use of capital than another asset. While it may be tempting to buy shares in a gold mining stock that’s fallen even further from its high, the easiest and safest way to buy gold is to buy an exchange-traded fund (ETF) such as the SPDR Gold Shares (GLD -0.50%) ETF or the iShares Gold Trust (IAU -0.48%). There is simply no way that the industrial and decorative applications of gold can keep up with the gold supply available.
Given the difficulties associated with physical gold as an investment, investors may be better off looking for other options, such as paper gold.
