Research has it that the return rates of physical gold are never profitable if you invest in the gold jewellery. The reason being that the price of jewellery is not only determined by the gold rates but it also includes the making charges and this is the just the half story i.e. when you purchase the gold. Gold has been a highly preferable investment tool because of the liquidity it offers. In comparison to other forms of investment like stocks and bonds, gold has proven to be an asset that is easy to liquidate and thus, in times of an emergency, it can easily act as an investment cushion.
A major disadvantage to investing in gold is that there are no periodic cash flows made to the investor. Unlike most stocks and bonds, there are no regular cash dividends or coupon payments made to gold investors." Also, cash isn't used exclusively for dividends.
Reasons to invest in gold:
1. Because it is a real asset with limited supply, gold is an effective inflation hedge.
2. Gold typically performs well during recessions, bear markets, and when stock market volatility is high.
3. Gold has a low correlation with most asset classes. This is a useful characteristic when building a diversified investment portfolio. A gold investment can be an effective way to hedge portfolio risk and volatility.
Reasons not to invest in gold:
1. Unlike cash, stocks and bonds, gold does not pay any sort of yield. In fact, storing and insuring gold can result in a negative yield.
2. What is gold worth? Because there is no yield, it’s impossible to calculate the intrinsic value of gold. The gold price is driven entirely by supply and demand, which means its price has a speculative nature to it.
3. Liquidity can be a problem with a gold investment. If you own physical gold, you need to store and transport it. If you own gold indirectly, you may be exposed to the same liquidity problem as other financial assets in the case of a collapse of the financial system.