Gold And Diwali
October 29, 2012 8 Comments
Buying gold on Diwali is a well established tradition in India.Have you ever wondered how well you would have done if you had bought gold every Diwali day for the last 10 years?Here are the stats:
In the past 10 years, gold has been a great investment. If you had bought some gold each Diwali over the past 10 years, then these are the gains you would have seen by the next Diwali in Rupee terms: 9.3 per cent, 11.7 per cent, 8.0 per cent, 26.6 per cent, 11.5 per cent, 32.7 per cent, 23.5 per cent, 22.8 per cent, 36.7 per cent, 16.5 per cent.Compounded, the total gains are 670 per cent.So you could say ‘Sona hee hai, koi fizool kharchee thodey naa hai.'(It’s gold, not a waste of money)and make a purchase this Diwali.
But before you go overboard ask yourself how likely it is that this run of unprecedented returns in gold will continue.Or in concrete terms ,how likely is it that 10 grams of gold will cost Rs 2 lakh in 2022?
My answer is:Your guess us as good as mine.But if 2 lakhs per 10 grams sounds absurd do take a look at this chart compiled by the RBI.Way back in 1992 or in 1970 what would you have said about today’s prices?
Life is uncertain.Time,wealth and happiness are transient.If gold,especially ornaments, make you happy,go ahead and buy them.You might not become a billionaire from holding them .You might even lose money. But they will be a surer source of value than the newest Tab or TV.
About Keerthika Singaravel
wealthymatters 
You are correct about the investment. But when you buy gold as jewelery, hard to take off to get a profit. So it not totally an investment. 😛
Well here is how I see the issue:
How many Indians really buy gold ornaments to sell?The only time Indians sell ornaments is in times of distress or when gold is recycled for weddings, if funds are low.So generally gold ornaments are passed down the family and are likely to become heirlooms.
As time passes,expenses such as making charges tend to rise as labour rates rise.Old gold jewellery locks in these old rates.And if you take care to pick quality workmanship and evergreen designs,it could be used for a long time and it would even be possible to sell them as antiques.I am personally interested in antique jewellery and I know others who are similarly interested.
Even if you don’t want to hang on to gold jewellery forever,i.e treat gold ornaments as consumer items,the way the West does,you are likely to get a better price for them than your old laptop.phone or TV.
Lastly if it is concerns about purity,my take is that Indian jewellery is generally of higher karatage unlike say Russian or Slavic ones.Also these days we can insist on hallmarking for a nominal fee.Also well known jewellers here have a reputation to uphold and are unlikely to sell brass and most of them give you written buyback guarantees.So, as long as I buy from the big names,insist on hallmarking and written buybacks I can’t do that badly on what is essentially an impulse purchase on a celebratory occassion.
Shares can lose value as much as gold ornaments.At least with the gold I can wear them and enjoy them.Blips on my demat account just don’t offer that option.So not totally an investment is often not such a bad thing.As long as we live there will be expenses and this is not the worse expense.
Actually it was a joke.
Malays and Indian have a lot of similarity in term of culture. Most of Malays woman like to wear gold jewelry. In the past, some Malays woman wear jewelry up to their forearm.
That why I said “hard to take off”.
For me, as men, when we gift to our wife, we can not take back (and that why it not an investment). But it was a sign of appreciation. Hehehe.
Mmm now I got the joke.I thought you were of the opinion that a person should buy coins/bars,ETFs, mining stocks etc.
By the way, happy diwali.
Thank You
Great thing about gold is it retains its value, even thousands of years later. Gold is a good investment.
Yes as long as you pay a decent price for the bit you buy.