How Rewarding Is This Old Gold-Buying Habit?

Over the past ten years, international gold prices have nearly tripled. In India, this rise has been even steeper due to the depreciation of the rupee against the US dollar

From an investor’s perspective, gold has delivered impressive returns over generations, particularly in the past decade

Source : Freepik

By Gaurav Goel

Gold has long been regarded as a reliable alternative currency and a trusted medium of exchange for centuries across the globe. Beyond its monetary role, gold holds immense cultural significance—especially in ancient civilizations like India and China, where it is seen as auspicious, a symbol of prosperity, and a generational store of wealth. Its ability to be stored, transported easily, and accepted globally makes it a unique commodity whose value has endured through wars, famines, and financial crises.

From an investor’s perspective, gold has delivered impressive returns over generations, particularly in the past decade. Its strong performance during periods of economic turmoil makes it an effective hedge and a valuable tool for portfolio diversification. Historically, gold has shown a negative correlation with the US dollar, offering an additional layer of protection during currency volatility.

Over the past ten years, international gold prices have nearly tripled. In India, this rise has been even steeper due to the depreciation of the rupee against the US dollar. This period has been marked by a series of global disruptions—pandemics, wars, regime changes, and widespread uncertainty. Gold has stood out as a safe haven amid these challenges. The recent political upheaval with Donald Trump’s rise to the US presidency added to global instability, weakening confidence in the US dollar and enhancing gold’s appeal. Central banks around the world have responded by increasing their gold reserves—purchasing over 1,000 tonnes annually for three consecutive years—while cutting back on US treasury holdings. As a result, gold has surged nearly 50% in just the last year, outperforming all major asset classes.

Given its resilience, gold deserves a place in every investor’s portfolio. However, it’s important to recognize the risks. While systematic investing in gold—via ETFs or mutual funds—can yield solid long-term returns, overexposure should be avoided. Investors must stick to allocations aligned with their risk profiles and not chase returns based on recent performance.

Despite its strong track record, gold should not be viewed as a one-stop investment solution. It’s best to limit exposure to 10–15% of total wealth. Going overboard can backfire, as history shows that gold has also gone through extended periods of underperformance. Many speculators have lost money by trading gold aggressively. Price volatility has increased significantly in recent years, and unnecessary buying or selling should be avoided. Even investment legends like Warren Buffett consider gold a non-productive asset and generally steer clear of it.

In conclusion, gold remains a vital, strategic asset—but like all investments, it demands discipline, diversification, and a balanced approach.

(Author Is An Entrepreneur and SEBI Registered Investment Advisor)

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