Gold as an investment option – A brief introduction
Gold has become an investment option with its precious metal status, ever increasing demand and rising prices. The pleasing glitter and surprising malleability of gold have always been magic attractions for mankind.
Naturally occurring metals which are rare, valuable and find application in multiple uses are called precious metals. Gold is one of the eight most precious metals; the others being ruthenium, rhodium, iridium, osmium, palladium, platinum, and silver. Unlike other precious metals, gold with its Midas touch has contributed in transforming the history, science, literature, monetary system, investment habits and many other spheres of human life. Attempts to make gold artificially has not so far succeeded. This aspect along with demand for multiple applications adds value to gold. Truly, gold glitters as an investment option.
Different forms of gold
Gold is found as nuggets or grains in rocks. Gold occurs in pure state naturally and does not require any processing. Primary gold is rock formations which are converted to gold mines. Secondary gold is found in small waterways that flow through rock and mineral formations. Gold is found on nearly all continents on Earth. South Africa has the largest concentration of gold. Though presently defunct, the Champion Reef Mine, located on the Kolar region of India is the second deepest gold mine in the world.
A brief history of Gold
In ancient times gold was equated with gods and rulers. During that era, gold was widely used in making and decorating religious shrines, temples, tombs, idols, plates, cups, vessels and jewellery. The gold ‘ducat’ coins introduced by Venice in the middle ages remained the most popular coin in the world for next five centuries. Expeditions for gold in the newly discovered Americas were initiated by King Ferdinand of Spain, in 1511. Gold was discovered in Brazil in 1700. The 19th century witnessed the mad rush for gold in 1848 with the California Gold Rush. By 1869, South Africa became the major source of gold followed by the 1896 Yukon Gold Rush.
At present gold is mined in 90 countries. The major producers of gold are China, Australia, the USA, Russia, South Africa, Canada, Ghana, Indonesia and Uzbekistan. Leading markets for the gold are India, China, the USA, Germany, Turkey, Switzerland, Thailand, Vietnam, Russia and Saudi Arabia.
Uses of gold
Gold, beauty and power have been part of a mighty combination from ancient times. Gold has been historically used as ornament for the gods and affluent. It was widely used as a medium of exchange or money. Gold standard and gold exchange standard applied gold as the underlying asset for determining the value of currency. Various gold based monetary systems over a period paved way for the present era fiat monetary system.
Efficiency as a conductor of electricity and the corrosion free characteristic make gold the most important component in the manufacturing of electronic gadgets including cell phones, calculators, computers, watches and television sets. Gold is used in switches and relay contacts, connectors, connection strips and wires and soldered joints. Gold finds wide application in spacecrafts. The gold coated polyester film covering of spacecrafts reflects infrared radiation and stabilises the temperatures inside the vehicle. Nanotechnology, dentistry and medicine employ gold.
India and the fascination for gold
In India, gold has important roles in social, spiritual and financial spheres. It finds place in religion, rituals and ceremonies. Gold is considered as the symbol of prosperity and auspiciousness. Indian brides, babies and married women, irrespective of their cast, creed, religion and social status wear gold jewellery. For an Indian, gold represents financial security and is a good investment instrument. It is saved, inherited, gifted and hoarded. India is the world largest market for gold accounting for 20 per cent of the world’s demand.
Increasing price of gold ensures easy liquidation in case of emergency. Banks and NBFCs, offer gold loans against pledge of gold ornaments and jewellery at attractive interest rates to tide over short term liquidity shortfalls of investors. This also adds to the attraction of investment in gold.
