The Covid-19 pandemic has roiled the global economy. What started\nas a health crisis has quickly turned into an economic crisis. Countries across\nthe world have placed restrictions on movement and gathering of people to slow\nthe spread of the virus. With businesses shut and economic activity declining,\nmost of the investment assets have been negatively impacted. <\/p>\n\n\n\n
Equity markets have been volatile due to the uncertainty around\nthe overall impact of Covid-19.\nWhile weak consumer sentiment and limited liquidity has choked the real estate\nmarket, the rising risk of defaults has pushed the debt markets into turmoil.\nIn contrast, the value of gold has been rising amid the health and economic\ncrisis.<\/p>\n\n\n\n
When you invest in normal times, the objective of the investment\nis generating returns with manageable risk. However, during an economic downturn like\nthe one due to Covid-19,\nthe investment aim changes to capital preservation and liquidity. Gold is\nconsidered to be a good store of value, which has made it a safe haven\ninvestment. Investors flock to safe-haven assets during economic uncertainty.\nThe value of gold has risen during an economic downturn and political instability on\nmost occasions and the Covid-19\ncrisis may not be different.<\/p>\n\n\n\n
In the early 2000s, a number of economic and political crises\ntook place. In 2000, the US stock markets collapsed, while the World Trade\nCentre was attacked the next year. These events had a ripple effect on markets\nand economies, including India, across the world. In the meantime, the price of 24 carat gold\nrallied from Rs 4,300 per 10 gm in 2001 to Rs to Rs 8,400 per 10 gm in 2006. <\/p>\n\n\n\n
The world faced a financial crisis in 2008 which led to an economic downturn in many\ncountries. In 2008, the value of gold declined initially in line with other\ncommodities as economic activity slowed down. However, the value of the yellow\nmetal recovered quickly as the global economic health deteriorated. From Rs\n13,031 per 10 gram in October 2008, gold prices rallied to Rs. 18,122 per 10 gm\nin December 2009. Gold prices continued to rise unabated till at least\nSeptember 2011 as central banks across the world became net buyers of the\nprecious metal. Gold investors in India gain additionally during an economic\ncrisis as the value of INR generally depreciates against the US Dollar, which\npositively affects gold returns. <\/p>\n\n\n\n The value of gold cannot collapse to zero due to a high intrinsic\nvalue. It is a physical asset and can be liquidated easily, which makes it an\nideal investment during an economic\ndownturn. Storing gold can, however, be a cumbersome process. With the\ndevelopment of the financial sector, you can invest in gold-related products\nrather than actual gold. <\/p>\n\n\n\n Gold funds are an\nexcellent product to invest in the yellow metal. With gold funds, you can enjoy the flexibility\nof mutual funds and the safety of gold investments. The value of gold funds increase or\ndecrease in line with the actual value of gold. With Moneyfy app by Tata Capital, you can invest\nin top-rated gold funds without\nany hassles.<\/p>\n\n\n\n Additional Read: <\/strong>Why Gold is a Safe Investment Tool in an Economic Crisis<\/p>\n\n\n\n Investing in a gold\nfund gives certain advantages as opposed to physical gold. Some of the\nadvantages are:<\/p>\n\n\n\n No need to spend a penny on the security of the investment in the case of gold funds. If you buy physical gold, you will have to invest in a secure holding place.<\/p>\n\n\n\n Gold funds help you diversify the investment on multiple levels. One can diversify his\/her overall investments and reduce market risks by investing in gold funds. <\/p>\n\n\n\n Besides investing in physical gold, gold funds also invest in entities involved in the gold value chain like producing and distributing companies, thus diversifying the investment further.<\/p>\n\n\n\n Gold funds offer greater flexibility as you can invest any amount as per your convenience. On the contrary, physical gold is generally sold as bars of fixed weights like 5 gm or 10 gm, which requires you to invest a certain amount of money. <\/p>\n\n\n\n Gold funds are highly liquid investments and can be easily redeemed. Without the hassle of visiting physical stores, you can redeem your investment from the comfort of your home through the mutual fund investment app<\/a> from Tata Capital.<\/p>\n\n\n\n Gold performs better than other assets during an economic downturn, making it a must-have in your portfolio. The weakness in the economy increases the counterparty risks in paper assets like bonds, but gold\u2019s value remains stable. Similarly, equity markets decline as revenue and profit of companies get affected, but the value of gold is inherent. These unique advantages provide gold with an upper hand during economic downturns like the one induced by Covid-19. <\/p>\n\n\n\n\n Year<\/strong>\n <\/td> \n Price\n (24 carat\/10gm)<\/strong>\n <\/td> \n Year<\/strong>\n <\/td> \n Price\n (24 carat\/10 gm)<\/strong>\n <\/td><\/tr> \n 2000\n <\/td> \n 4,400<\/strong>\n <\/td> \n 2010\n <\/td> \n 18,500<\/strong>\n <\/td><\/tr> \n 2001\n <\/td> \n 4,300<\/strong>\n <\/td> \n 2011\n <\/td> \n 26,400<\/strong>\n <\/td><\/tr> \n 2002\n <\/td> \n 4,990<\/strong>\n <\/td> \n 2012\n <\/td> \n 31,050<\/strong>\n <\/td><\/tr> \n 2003\n <\/td> \n 5,600<\/strong>\n <\/td> \n 2013\n <\/td> \n 29,600<\/strong>\n <\/td><\/tr> \n 2004\n <\/td> \n 5,850<\/strong>\n <\/td> \n 2014\n <\/td> \n 28,006<\/strong>\n <\/td><\/tr> \n 2005\n <\/td> \n 7,000<\/strong>\n <\/td> \n 2015\n <\/td> \n 26,343<\/strong>\n <\/td><\/tr> \n 2006\n <\/td> \n 8,400<\/strong>\n <\/td> \n 2016\n <\/td> \n 28,623<\/strong>\n <\/td><\/tr> \n 2007\n <\/td> \n 10,800<\/strong>\n <\/td> \n 2017\n <\/td> \n 29,667<\/strong>\n <\/td><\/tr> \n 2008\n <\/td> \n 12,500<\/strong>\n <\/td> \n 2018\n <\/td> \n 31,438<\/strong>\n <\/td><\/tr> \n 2009\n <\/td> \n 14,500<\/strong>\n <\/td> \n 2019\n <\/td> \n 35,220<\/strong>\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Gold investments<\/strong><\/h2>\n\n\n\n
I Security:<\/h3>\n\n\n\n
II Diversification:<\/h3>\n\n\n\n
III Multiple options:<\/h3>\n\n\n\n
IV Flexibility:<\/h3>\n\n\n\n
Conclusion<\/strong><\/h2>\n\n\n\n