I am not getting into whether you should buy gold or not buy gold. There are enough people on both sides. I am on the side of Warren Buffet, and the only gold I have is what has been gifted to me either at the time of my marriage or somebody else’s marriage.

Here is a set of reasons why people buy gold:

1. My grandmother, mother, aunts all bought gold, and it has been a great investment for all of them, so I will also buy.

2. I bought a gold chain for my birthday 4 months ago – see how much it has appreciated, and I have been using it too!

3. What can I do with a demat statement? At least I can wear or use my gold – so it is better than shares.

4. It has gone up so much – I am sure it is bound to go up further.

5. I have no confidence in paper assets – all governments are printing too much money. Fiat money has already failed.

6. Gold has been a store of value for the past 4000 years – it is mentioned even in the great epics. Equity has no history.

7. See the movement of prices for the last 10 years…at least 10 years is a trend, no?

8. Once it goes up, it CAN NEVER come down.

9. My father lost a lot of money in Harshad’s and Ketan’s scam….my mother’s never lost money in gold.

10. See the Korean, Indian, Chinese governments, ETFs – all cannot be wrong, they are all buying, and so much!!

11. In a worst case scenario I can use it as a currency. I know people who ran away from Pakistan to come to India could only carry gold. Even those who fled Kuwait in 1980 only carried gold and silver…

12. Gold is a safe harbour….when things go wrong in the world, gold does well….now is the time…

13. Because the US is printing so much of currency, all the countries are also printing – so there is no point in keeping money in any currency, so I am choosing gold.

14. With such low interest rates, gold will surely be better than bank fixed deposit

15. It is the best, no, it is the only hedge against inflation.

I will refute them one by one soon 🙂

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  1. Subra,
    Although I like Gold however I have some reservations about the so called benefits.
    1. There is no need to be happy when gold prices go up. 99% of gold in India is ornamental & I have not seen two people who have sold their gold jewellery or a part of it because prices have gone up.
    2. Gold prices in 80s were 1200 USD/ounce and it took them 20 years to cross 1200 again after correction. So gold too can go down.
    3. ‘People are buying gold as they dont trust currency’ is the new argument being pushed by media. But currency can lose value only when governmet loses it’s powers or trust. If you dont trust govt to retain currency value, can you trust it that it will not pass an order that all the gold is a national property & all individual have to surrender it to the govt.
    Secondly if the govt is so weak that it can not defend it’s currency, will it be able to defend your gold. In anarchy pirates will first attack gold.
    4. Lastly my wife asked me to buy her new gold chain. A few days later when going to a marriage she was wearing artificial jewellery, when asked why not gold she said “are you mad!! it’s not safe to wear gold outside. OK. Then I asked why she need more jewellery, the answer was it is an investment. Myself- Then we should sell some of the earlier possession as prices are high & for any investment yo have to sell high. Again she yelled – Are you Mad!!!
    Now I am confused or……may be…. Mad!!

  2. Subra Sir, I will be waiting for your answers for above 15 points. I am also not a fan of Gold. I agree with Pramod for point number 4, it happens with most of the people (including me 🙂 ). Subra Sir, one of your article in past discussed about Car being an asset or not, can you also write a similar article on Gold as an asset, considering Gold vs Artificial Jewellery.

  3. Few days back… one gentleman told here on subramoney blog about how cosistently he and his wife are buying gold for so long time every month…..

    All I wanna suggest is.. everyone should have diversified portfolio.. like gold.. property.. FDs.. Shares/Mutual funds etc..

    If you have gold .. and you wanna buy some property or need some business needs.. you can definitely sell that..

    Subra.. I’ll again say.. Share market/MF is only for those.. who got surplus money..

  4. Irrespective of historic trend, I think we are in new era where gold is recognized as most valuable asset than any other paper form of investments. I know atleast 10 people who had purchased Gold and quickly got the cheaper loan using gold as collateral. These days except home loan, if you need sizable amount of loan, I am sure gold is the only option one can rely either in emergency or for any other need.

    In the west, gold loans are not as popular as in India. People like Warren shunned it terming it as dead investment. The situation is different in India and I do not see anything wrong of buying gold as life time investment for emergency needs and it pass on to next generations.

  5. I wish Subra (and Krugman & Buffet) keep running down gold.
    Then, maybe, the price of gold will fall and I can buy some more.

  6. Warren Buffet may have had a great track record, but over the last 10 years he surely has missed the great Gold bull run. So actually over a 15 year basis, he may have beaten the equity bench marks but people like me with 55% of investment in gold have done better than Buffet.

  7. Probably the next article on Gold would come only if the bubble bursts 😀 So reader may need to wait a bit 😉

  8. Subra,

    My wife likes if we buy gold. I go along because, she will not sell the gold and we really remain locked in for long time to gain the appreciation. I just convinced her to buy in biscuit form thats all.

    Lots of mental confort for ladies.

  9. Subra,

    no matter what people think but Gold is Gold, and will remain Gold.
    It keeps on proving its value ‘again and again’ 🙂

  10. Whether you buy gold or piece of rust iron, buy it if its price appreciates, not otherwise! Again, like real estate, there are cheaters everywhere in gold ornament business. There are so many varieties like KDM 22 carrot BIS mark etc. Lots of money is wasted in wastage, making charges..etc., so its not good to buy them as ornamental gold. Better to go for paper gold(like ETF). My uncle used to decorate his fat wife every year with gold chains etc who had not crossed eighth standard. They will never miss going to any function in the village like ear-piercing, coming of age, or marriage. This is just to show show off their gold to other poor villagers. There is no use of decorating one’s wife who is nothing but skin and bones. You can buy it, hold it for some time as ETF and sell it when it appreciates

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