Is gold as an Investment?

Gold has a lot of emotional value. But as an investment, it does not have much value. Let me make use of historical data to prove this to you,

In 1980 the cost of per gram of gold is 167.32 and in 2008 the cost of per gram gold is 1137.46. Annualised growth is 7.08%, which is very low and his could be erosioned by the inflation

So is it wrong to put money in Gold? Not exactly...

Gold has its uses, if kept as pure coins and bars:

It has high liquidity. It might take you a maximum of half hour to convert it to cash.

It is easy to procure (again half an hour) and protect (a bank locker will do) compared to other commodities.

Let investment grade (pure gold coins and bars) gold not be more than 5-10 per cent of your financial investment portfolio, as a cushion to manage inflation and emergencies. Count gold jewels as expenses, not as savings or investments.

Suppose the present value of 1000 invested in 1980 in gold (167 rupees per gram) and in sensex (110points). Now the value invested in gold would be 6811 (1137 rupees per gram) and in sensex would be 1,42,222 (15644 points)

Treat gold as a portfolio component to match inflation. It will serve you at its best that way. And if you truly love your children/friend/spouse, do not buy gold coins and jewellery; instead, buy them an index fund for the same value.