Gold vs Bank FD: Which asset class attracted more money from Indian middle class?

Gold vs FD Bank: Gold in India has historically been the preferred investment option, especially among low-income households and rural population. Cultural affinity, weddings and festive gifting remain the primary factors driving gold demand in India.

A household survey revealed that low- and middle-income groups consider gold as a better investment than bank deposits, citing its role as a hedge and its fungibility for raising short-term funds. Plain gold jewelry is also preferred as it has a better realizable value. This was revealed in the results of the household survey conducted by the Indian Gold Policy Center (IGPC).

The survey results suggested that the demand for gold in low-income households is not necessarily driven by income levels, rather it is the lack of access to financial and investment products that has a larger bearing on demand. The final of the survey revealed that “Moreover, in the Indian context, households in low- and middle-income groups and in rural belts of India consider gold as a better investment vehicle than bank deposits.”

The role of gold as an inflation hedge is the most comfortable factor for them. More than any formal financial training, their actual experience and intuitive understanding of inflation have guided his investment planning for years. Here, gold has become your default option compared to other financial products, and it is not surprising that you make gold your natural hedge against inflation and emergencies.

Moreover, the fungibility of physical gold to raise short-term funds for urgent household needs, which was tested again at the time of the pandemic, increased their confidence in gold. As such, gold by default becomes a reliable alternative investment that has a proven track record and continues to be the preferred investment option among households.

Another interesting point highlighted by the survey is the strong preference for buying solid gold jewelry, which has a better realization value when melted or exchanged compared to a studded piece of jewellery. 

The World Gold Council said that this is a good indication that gold is not only being purchased for adornment, but is also considered a de facto investment product.

The government imposes restrictions on certain gold jewellery

On Wednesday, the government imposed restrictions on the import of some jewelry and gold, in a move that should help limit the import of non-essential items.

Now, the importer will need a government permit or license to import these gold products.

Gold prices close to a one-month high

Meanwhile, gold prices advanced to a near-one-month high on Thursday. Spot gold rose 0.3 percent to $1,962.11 per ounce by 0658 GMT, hitting its highest since June 16. US gold futures gained 0.2 percent to $1,965.80.

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