invest in gold


Can it be profitable to invest in gold in India?

December 28, 2012, 12:00 PM Przemysław Radomski , CFA

I read your articles, and found them very helpful. Thank you for your devotion to the average investor. Can you shed some light on the following regarding India:

  1. If the dollar collapses, what happens to gold vis-à-vis the rupee?
  2. We currently receive 9% interest in a fixed bank deposit. Inflation is 8%. Would it be more profitable to invest in gold in India? And will gold provide returns greater than inflation?
  3. Does fiat currency exist in India?

Insight on the above would be very helpful. Thanks and regards.

Thank you for your feedback, we appreciate it. As far as your questions are concerned:

  1. We think that gold would rally strongly in this case, in terms of the Indian rupee. In fact, if the US dollar collapses then gold and silver will most likely soar very high in every other currency and relative to other goods as well.
  2. While we can't guarantee any rate of return on gold or any other asset, we believe it's highly likely that gold will provide a much higher return in the coming years than the fixed bank deposit you mentioned, and more than inflation.
  3. Yes, the Indian rupee is not backed by gold or other precious metals and is therefore a fiat currency. You will find more information on fiat currency in our Publications section.

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