Gold has proved your grandmother right

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Gold has proved your grandmother right

Had you listened to your grandmother and bought gold on Akshaya Tritiya, your investment would have earned handsome returns. Rising geopolitical tensions and widespread economic uncertainty have pushed gold prices to almost Rs 10,000 per gram. Gold bought on this auspicious day has delivered double-digit returns in the past 25 years.
A substantial portion of these returns is attributable to the dramatic rise in gold prices in the past four years. Gold prices have more than doubled from Rs 47,452 per 10 grams in April 2021 to Rs 98,955 now. Investments in the yellow metal since 2021 have yielded more than 20 per cent returns. That’s more than what equity funds have delivered in the past four years.
However, though gold prices have moved up smartly, the yellow metal has also witnessed extended periods of muted returns. Between 2014 and 2018, the annualised return from gold was less than 2 per cent. Gold could not even beat the 4.8 per cent annual consumer inflation during that period.
Many financial advisors consider gold a dead investment that doesn’t generate any income or pay dividends. While that is true to some extent, gold is an excellent diversification tool because its price is not linked with other asset classes. During a geopolitical crisis or periods of high inflation, equities tend to do poorly. But these conditions are good for gold. The negative correlation reduces the portfolio risk.Gold is also a very liquid asset and can be bought and sold across global markets.
Experts forecast a further upside in 2025. Geopolitical tensions have only increased, and the new occupant in the White House has triggered a worldwide tariff war.
Even so, don’t look at gold as a speculative bet. Rather, treat it as a wealth preservation tool and portfolio diversifier. Experts advise that investors should not put more than 15-20 per cent of their overall portfolio in the yellow metal.
With gold hitting Rs 1 lakh per 10 grams, many investors may be thinking of booking profits. With the removal of the indexation benefit in 2023, gains from gold are now added to the income of the investor and taxed at normal rates.
But Sovereign Gold Bonds (SGBs) offer a unique tax advantage to investors. SGBs are issued by the RBI, and their prices are linked to the price of gold. Investors get 2.5 per cent interest every year, which is fully taxable. But if SGBs are held till maturity, the capital gains from the investment are tax-free.

Year Akshaya Tritiya Date Gold Price (Rs/10 gm) CAGR Till Date* (%)
2000 6-May-00 4,355 13.3
2001 26-Apr-01 4,025 14.3
2002 16-May-02 4,827 14.0
2003 6-May-03 5,310 14.2
2004 23-Apr-04 5,713 14.5
2005 11-May-05 6,113 14.9
2006 30-Apr-06 9,520 13.1
2007 20-Apr-07 9,352 14.0
2008 8-May-08 11,726 13.4
2009 27-Apr-09 14,792 12.6
2010 15-May-10 18,177 12.0
2011 6-May-11 22,000 11.3
2012 24-Apr-12 29,055 9.9
2013 13-May-13 26,890 11.5
2014 2-May-14 29,480 11.6
2015 21-Apr-15 26,950 13.9
2016 9-May-16 30,330 14.0
2017 28-Apr-17 29,620 16.3
2018 18-Apr-18 (Wednesday) 31,410 17.8
2019 7-May-19 (Tuesday) 31,739 20.9
2020 26-Apr-20 (Sunday) 46,353 16.4
2021 14-May-21 (Friday) 47,452 20.2
2022 3-May-22 (Tuesday) 52,670 23.4
2023 22-Apr-23 (Saturday) 61,080 27.3
2024 10-May-24 (Friday) 73,240 35.1



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