Let us look at the performance of the yellow metal, especially in the backdrop of war, rise in commodity prices and inflation.
Gold in the past year has returned ~5% prior to tax. This is intriguing as many new age banks and Small Finance Institutions offer Interest rates on the higher side of 5%
The graph shows the repo rate value of as put forth by RBI in 2022 in comparison to the past year. With More hikes on the way, the savings & fixed deposit interest for the retail investors is set to see an hike starting from June-July 2022.
Link: India Interest Rate – 2022 Data – 2000-2021 Historical – 2023 Forecast – Calendar
Considering this, the following can be said with certainty
- Gold is a hedge and not an investment
- Gold (physical) returns have been at best abysmal over the years of data that includes recessions and wars
- Equities can be depressed in terms of returns for 1–2 years but provide better returns against inflation
- A rise in the yellow metal prices should be chosen as a way to exit the holding rather than consolidating the position
- Commodities (especially bullion) are best suited for trade and not for wealth creation
Hope this helps
You can follow my blog or Facebook page on investing to get insight into other stocks.
Leave a Reply