Gold has been traded and used as currency for over 6000 years. Its relevance as an investment cannot be understated even today.

We have seen gold prices creating record highs in last one year. It has risen by close to 40% in dollar terms in last 1 year. This is more than equity benchmark in US and India. There are a number of reasons as to why this is happening. One of the primary reasons is that central banks across the globe (particularly China) are busy purchasing gold as they are diversifying their investments away from US treasuries.

Gold is considered as a reserve currency and a natural hedge to inflation. This has also contributed significantly to the recent surge in gold prices. We have also seen that low-interest rate environment helps some diversion of money from deposits towards precious metals like gold and silver. Gold also has usage in industries particularly electronics.

Gold prices and interest rates have an inverse relationship, meaning that lower interest rates tend to lead to higher gold prices and vice versa. When interest rates are low, gold becomes more attractive to investors because it’s an alternative to low-yield investments. This can lead to increased demand for gold and higher prices. When interest rates are high, gold becomes less attractive to investors because other investments become more profitable. This can lead to decreased demand for gold and lower prices.

Even at current prices precious metals like Gold and Silver look attractive to us from a long-term investment perspective. In fact, we find silver a more attractive proposition vis-à-vis gold at the moment as the gold silver ratio is currently heavily tilted toward gold, way above the historical averages.

Other attractive investment options include equities and real estate. Both the asset classes should be considered from a long-term investment perspective. They have seen a substantial rise recently and investors should understand the risk associated with them before investing.

Every asset class has its own space in an investment portfolio. So is Gold. Importance of Gold cannot be undermined especially during recession. Given the current global geopolitical and economic situation, we remain bullish on prospects of Gold.