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Gold’s Impressive Growth Over the Years

Gold prices in India have seen a remarkable rise over the past few years. Back in April 2018, the price of gold stood around ₹28,000 per 10 grams. Fast forward to today, and the price is hovering near ₹78,500. That’s almost three times the value in just six and a half years. For an asset class often considered to provide no returns, this growth has been extraordinary. This price surge shows that gold, despite what many critics may say, still holds significant value.

Gold’s Role in Wealth Preservation

Gold is often criticized by stock market enthusiasts and value investors who believe it doesn’t generate returns like stocks or other investments. However, those who have held onto gold as a part of their portfolio have seen it conserve their wealth over long periods. In fact, gold has always been a reliable way to preserve wealth. While other investments may fluctuate, gold has historically provided stability, especially during times of economic uncertainty.

A Shift in Global Attitudes Towards Gold

There has been a noticeable shift in how the world views gold. Central banks across the globe have started buying gold again. This is a significant change from 1971 when the US decided to stop backing its currency with gold. After 54 years, the importance of gold is being recognized once again. It remains a core part of the global financial system, serving as a foundation of value. Meanwhile, fiat currencies are simply a medium of exchange, constantly subject to fluctuations in value.

Gold as a Hedge Against Rupee-Based Assets

In India, gold serves as an essential hedge against assets priced in rupees. While gold prices may rise and fall over short periods, it is a long-term investment that helps protect against any risks tied to the rupee. As an asset priced globally, gold offers Indian investors a way to protect themselves from fluctuations in the domestic economy. It’s not just a valuable metal but also an insurance against potential risks that may impact other investments.

A Consistent Performer Over Decades

Over the past 50 to 60 years, gold has consistently provided an annual return of around 12%. This steady compound annual growth rate (CAGR) makes gold one of the few investments that have stood the test of time. It has proven its worth as a stable investment, balancing the risks associated with other, more volatile assets. By doing the math, you can see how gold can fit into a portfolio as a counterbalance, ensuring that when other assets are underperforming, gold can help stabilize the overall portfolio.

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