Bottomline: Why You Should Invest in Gold

With its recent impressive performance, gold has caught the attention of investors, and for good reason. While equities and debt are solid investment options, gold offers unique benefits that make it a worthy addition to any portfolio.

1. Diversification and Currency Risk Mitigation: Gold provides diversification benefits and helps mitigate currency risk. Allocating a portion of your portfolio to gold can help spread risk and protect against currency fluctuations.
2. Inflation Hedge: Although gold does not necessarily move in sync with consumer price inflation over the long term, it has proven to be a reliable hedge against inflation. In the U.S., gold has historically appreciated by 5.6% annually, outpacing the compounded inflation rate of 3.4% over a 46-year period. Similarly, in India, gold has generated returns of over 10% over 45-year and 27-year periods, compared to inflation rates of slightly over 6%. This translates to a real return of nearly 400 basis points, highlighting gold’s ability to preserve purchasing power in the face of rising prices.

In summary, while gold may not always move in tandem with inflation, its ability to protect against currency risk and provide a hedge against inflation makes it a valuable asset class to consider for investors looking to build a resilient and diversified portfolio.

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