India is the second-largest consumer of yellow metal across the globe and that explains its significance in the Indian household. Gold is among the top investment options, especially among ladies. Even during big fat Indian weddings, a major chunk of the budget is kept aside for the purchase of gold coins and ornaments.
Other investment options that strike your mind when looking for safe instruments in terms of savings and yielding better returns are real estate and fixed deposits. Real estate, however, requires big and well-researched investment but gold and fixed deposits require small investments.
Defying odds of Covid-19 pandemic, gold gave a return of almost 28 percent in the year 2020 on a year-on-year basis while Sensex witnessed a growth of 16 percent and returns from fixed deposits stood at 6 percent. The pandemic hit most of the economies across the world and the uncertainty drove investors towards safe havens of investments, which supported gold prices additionally. Also, the production cost of gold at the international level has witnessed a jump which eventually gave a boost to gold prices.
The year 2020 witnessed a downfall in gold imports in India since marriages and other functions had to be postponed due to the government’s lockdown guidelines owing to the pandemic. But with the availability of vaccines and easing guidelines, the functions that were postponed last year are likely to happen this year and eventually increase the demand for gold. Additionally, hassle-free mode of gold purchase and accumulation on digital payment apps like Paytm, PhonePe, among others, is attracting a number of digital investors.
Gold has given almost 100 percent returns in the last 10 years while FD interest rate is almost 5-6 percent in almost all leading banks in India and 7 percent in some of the comparatively smaller banks. Due to high liquidity and expectations of higher inflation, gold will continue to give good returns as compared to fixed deposits due to low-interest rates.
For a long-term investment, one should opt for gold as it always gives security against inflation and sovereign gold bonds are the best investment tool since it gives a fixed return of 2.5 percent on yearly basis irrespective of gold actual performance.