Gold, the reddish-yellow metal, is a chemical element with atomic number 79. This metal is one of the highest atomic numbers of items that occur naturally. Gold, in its purest form, is a bright, soft, dense, malleable, and ductile metal. It has unique characteristics, both physical and chemical. Gold is a noble metal, as it does not oxidize. The purity of gold gives us return inreturn. Generally the range of gold can weigh between 22 to 24 Carats. A 22 Carat gold rate is considered to be the optimum form of ratio for taking a loan against gold.
However, Gold has a value beyond its chemical features. It is an essential part of diversified investment. Gold price increases according to the events of the markets. Though the price of Gold is volatile in the short term, it has maintained a steady upward graph for ages. In the recent past, the gold loan has become quite popular. Many financial institutions are offering gold loans at lower interest rates. The loan amount, which is sanctioned, depends upon the amount of Gold the borrower is depositing. Loan against Gold is cheap and a better option than borrowing a loan.
Investment in Gold is a worthy thing to do. Here are a few reasons to justify its worthiness.
Reasons to Invest in Gold
A great value throughout ages: Throughout the centuries, Gold is seen as a unique and valuable commodity. Instead of depositing currency notes, coins, and other assets, Gold must be deposited as it has maintained its value throughout the centuries. Gold is considered to be a wealth that is passed on from generation to generation. Since ancient times, people valued the unique properties of the precious yellow metal. The metal gold does not corrode or wear out with usage and time. It can be melted over a flame, which makes it easy to work with and stamp it as a coin.
Saviour in adverse times: The yellow metal can come in handy during a crisis. Several banking and non-banking financial institutions provide a gold loan. A gold loan can be used to cater to various financial needs such as a child’s higher education or marriage, medical treatment, expansion of business, buying a house, sudden death of near ones, etc. During the sudden arousal of emergencies, the long deposited Gold can be used as collateral. This collateral provides funding.
Deflation Protection: Deflation is a period when prices drop, business activity slows down, and the whole economy is burdened by debt. During the depression period, the relative purchasing power of gold shoots up, and other prices drop sharply. This is because people hoard cash, and the safest place to save money is in Gold.
Inflation Hedge: Gold has always been an excellent hedge against inflation. Gold price generally increases when the cost of living increases. During high inflation, the stock market has plunged, and the gold prices soared high. The country’s currency loses its power against inflation. Then Gold is priced in that currency units. Along with everything else, the gold price tends to increase. Gold is a good store value, and so people get encouraged to buy Gold when their local currency is losing value.
Geopolitical Uncertainty: As per history, a rise in international tension has proven supportive of the gold price. Gold is valuable both in times of financial as well as geopolitical uncertainty. Gold is also known as ‘crisis commodity.’ When world tension rises, then usually Gold outperforms than other investments. When the government becomes unstable, then even gold prices increase. During macroeconomic uncertainty, Gold has been a good holding.
The weakness of the currency: When the value of the benchmark currency falls against other currencies, then people tend to move to the security of Gold, which in turn raises the gold price.
Increasing Demand at the circumstances: India is one of the largest gold-consuming countries in the world. In many states, Gold is integrated with the culture. Gold has many uses. The wedding season in India sees the highest Demand for Gold. The festive season in the country also witnesses a Rise in Demand for Gold. Gold is gifted in the form of pieces of jewelry, articles, coins, and other instruments. The metal gold is also used in making Idols and temples.
Portfolio Diversification: The Demand for Gold has grown widely among investors. Many investors are viewing commodity gold as an investment class. Investors keep aside a certain amount of funds for investment in the Gold. A diversified portfolio consists of stocks, bonds, and Gold to reduce volatility and risk. Gold is relatively negatively co-related with stocks and other financial instruments.
Redesign of Currency notes: The currency notes and coins keep on changing with years. The old currency notes and coins are no longer used now. From boxes come out old coins that our grandparents used to deposit. These deposits become of no use now. Also, note ban is done in countries for the nation’s economy. But the grandparents who have stored Gold in different forms can still be used.
Throughout the centuries, people have continued to value Gold for various reasons. It always has some value as insurance against tough times. A loan against Gold has its advantages. The interest rate in the gold loan is lower than other personal loans. There is no processing fee or foreclosure charges. Moreover, by taking a loan against Gold, helps in making optimum usage of Gold.