The cultural significance and appeal of physical gold continue to thrive in India, serving as a preferred saving and investment choice for many, especially outside metropolitan areas. According to Gnanasekar Thiagarajan, director of Commtrendz Research, the tangible nature of gold bars and coins offers psychological reassurance to investors, reinforced by emotional ties, traditions, and rituals commonly associated with gold purchases during festivals like Diwali and Akshay Tritiya, as stated by Ajay Suresh Kedia, director of Kedia Advisory.
Aside from being viewed as a hedge against inflation, physical gold is often considered a reliable store of value during uncertain economic conditions. Families frequently use gold for intergenerational wealth transfer, as noted by Prashasta Seth, CEO of Prudent Investment Managers. The recent surge in gold prices, which has increased by 59.2% over the past year, has further fueled demand.
Despite the growing popularity of gold ETFs, many investors remain loyal to physical gold due to its emotional significance and the privacy it affords. As Prasanna Pathak, deputy CEO of The Wealth Company, explains, direct ownership of gold bars and coins eliminates counterparty risks and allows for quick liquidity.
However, purchasing physical gold is not without its costs, including premiums on market prices and additional charges for making, storage, and insurance. Therefore, while gold ETFs offer transparent, low-cost, and liquid investment options, they lack the tangible connection that many Indian investors value. Buyers are encouraged to consider their specific needs—whether for cultural significance or investment strategy—when deciding between physical gold and ETFs.
Why this story matters:
- It highlights enduring cultural ties to gold in India.
Key takeaway:
- Physical gold and ETFs serve different purposes and appeal to different preferences among investors.
Opposing viewpoint:
- Gold ETFs offer efficiency and liquidity that physical gold lacks, making them a more suitable investment for some.
