Gold as an Investment

Why people invest in gold, the different ways to own it, and how it behaves compared with shares and bonds.

Gold has been valued for thousands of years. Today, many people hold it not only as jewellery but as an investment. How does gold fit into a portfolio?

Why people invest in gold

Safe haven: gold often holds its value or rises during crises, when shares fall.
Inflation hedge: over long periods, gold has tended to keep purchasing power, though not reliably in the short run.
Diversification: gold’s price often moves differently from shares and bonds.
Currency protection: gold is priced globally, so it can protect against a weakening domestic currency.

Drawbacks

No income: gold pays no interest or dividends. Its return comes only from price changes.
Volatility: gold prices can swing sharply and have fallen for years at a time.
Costs: physical gold involves making charges, storage and security risks.

Ways to own gold

Jewellery: common in India, but making charges and purity concerns reduce its investment value.
Coins and bars.
Gold ETFs: exchange-traded funds that track gold prices and trade on stock exchanges.
Gold mutual funds that invest in gold ETFs.
Sovereign Gold Bonds: issued by the RBI on behalf of the government from 2015, these paid 2.5 percent annual interest plus the gold price at maturity. The government stopped issuing new tranches from 2024.

Gold’s performance

Gold prices rose strongly in 2024 and 2025, reaching record highs, driven partly by central bank buying and global uncertainty. Over very long periods, however, shares have generally delivered higher returns than gold.

Gold in a crisis

During the 2008 financial crisis, stock markets fell sharply, while gold prices rose over the following years. An investor who held a small share of their savings in gold saw it cushion losses elsewhere. But between 2011 and 2015, gold prices fell substantially, showing it is not a guaranteed safe store.

How much gold?

Many financial planners suggest that, for most investors, gold should be a small part of a diversified portfolio, rather than the main investment.

Thinking gold always rises in value

Gold has had long periods of falling or flat prices. It can protect against some risks, but it is volatile and earns no income.

Key takeaways

Gold is valued as a safe haven, diversifier and long-run store of value.
It pays no income and can be volatile.
Options include jewellery, coins, gold ETFs and Sovereign Gold Bonds.
Many planners suggest gold as a small part of a diversified portfolio.