Written by Vaibhavi Gupta, a grade 8 student
2020 has checked off more “Probably Never going to Happen” boxes than any other year so far. So, it’s no surprise that is was also the first time in almost ten years gold hit a record high of over Rs. 50,000 per 10 grams. But, the question arises – Why are gold prices rising when everything else is lowering?
Have you ever thought about gold in terms of an investment?
Gold is said to be the least volatile (something that changes rapidly and unpredictably) investment, always retains its value against the long term, and it helps investors diversify their portfolio: or put simply, not have all their eggs in one basket. It has always been seen as a unique and valuable commodity. The price of gold always rises inflation (a rise in the cost of living and fall in the purchasing value of money ), unlike the stock market which plunges.
Hence, gold also acts as a hedge against deflation and inflation. Unlike other investments, however, gold does not provide regular returns, which has deterred some investors from making it the majority of their portfolio. The safety and security, along with the financial guarantee that gold provides makes it the most coveted investment of 2020.
And like with power and responsibility, with great demand comes great prices. Gold has a scarce supply, so this rule applies even more so for gold. There are other external factors too, which have played a part in helping the prices rise. India is the second-largest investor of gold, and the Indian Rupee’s value against the US Dollar has fallen sharply. These exchange rate fluctuations also help in increasing the prices as international gold is dollar or pound denominated.
Experts predict that as long as a slew of lockdowns and slowing global growth is alleviated, gold will remain in fashion and demand. The higher prices go, the more its talked about by analysts and financial media. More exposure also generally translates to investor interest, which means prices could rise even further.
All that glitters might not be gold, but all that is gold is surely glittering right now.