Following the famous saying," all that glitters is not gold", it has always attracted attention and is indeed a popular investment mode. However, if someone were to point out the drawbacks of investing in gold, one would doubt this popular adage.
It is a traditional belief that gold is the best passive income source, and this belief has proven to be quite irrational. Any growth in the value of gold entirely depends on when someone is willing to pay more for it. Unlike other financial instruments, the money invested in gold does not contribute to the economy's growth.
India is one of the largest gold importers in the world. Hence, this increases the fiscal deficit and further decreases the rupee power with respect to the dollar. When the value of rupees goes down, it paves the way for an increase in inflation. The modern financial system has a wide variety of asset classes that may perform better than investments made in gold. Hence, it only makes sense to invest in such asset classes.
Gold is best if it is viewed as an alternate currency. Whenever there is a rise in GDP, the prices of gold go down, but if there's an economic downturn (recession), then prices of gold increase due to the huge demand and supply. Also, many investors are not aware that gold prices largely depend on the international markets; that is, any significant fluctuations in prices of gold internationally will affect the prices of gold in India.
People might find these factors hard to believe because of the stereotypical construct that has led them to believe that gold is the best type of investment, and there aren't any influential factors that might lead its investors to its doom.
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Sachin Raturi is the Co Author Of International Bestselling And Award-Winning Book “The Growth Hacking Book 2”.
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