The yellow metal pales in terms of returns when compared to equity as an asset class. The investors should avoid any emotional attachment with gold.
Physical gold has been one of the favorite assets that Indians wish to hold. Marriage to marriage anniversaries, child birth to celebrating birthdays and what-not, we always have a reason to buy gold. At times, we don’t even need a reason.
If the gold prices are going up, our moms would suggest to buy before it goes further up. She will tell you how it was at Rs. 500 per gram when you graduated and it is 2500 per gram now.
If the prices fall, she transforms into Buffet (read ‘value investor’) and proclaims ‘accumulate’. This is the time. Buy cheap.
I ask “But when shall we sell? I haven’t seen anyone booking profits.”
Why are we so worried about gold prices going up when we would never sell?
The reason: We see gold with more of an emotional attachment and not an investment. If we considered it as an investment we would evaluate it thoroughly before buying.
Let’s evaluate if Gold has really delivered equal to the hype that has been created around it. (see comparison of asset classes over historic returns)
Equity has delivered 3 times the return as compared to Gold in the past 25 years. Gold hasn’t glittered and in fact been pale as compared to equity.
It seems that even God started realizing this and wants the gold assets donated in temples to work smarter.
Siddhivinayak temple in Mumbai is considering to deposit 160 KG of gold with banks under the gold monetization scheme. This shall help the temple earn 2.5% interest on the value of gold.
World’s richest hindu temple, Tirumala Tirupati, might also contribute 1.5 tonnes of gold to the scheme and get returns from otherwise not-so-great asset.
God has made the first move.
Let’s respond with a better one. Rather than just monetizing gold, let’s adopt equity for long term investments.
Your turn, Dear God. (Just Bless Equity, please…!!!)
By Sharad Singh
