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Gold

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Gold as an investment option | | Mayank Chandola MBA in International BusinessSymbiosis Institute of International Business | |

Table of Contents History of the yellow metal 2 Why it is attractive? 3 Portfolio diversifier 4 Inflation hedge 4 Investment risks in Gold 5 Risk with physical gold 5 Political Risks 5 Market Risks 5 Exchange rate risks 5 Demand/Supply side risks 5 Outlook 6 References 7

History of the yellow metal

Gold has always been used as a medium of exchange for goods since ancient times and has not suffered devaluation in the same ways as paper currency. Gold has a record long history as a commodity and as a store of value. It has been formally a monetary media in and around the world. Gold has faced complete official demonetization long back, yet it experiences continued and renewed interest as a private or unofficial monetary medium. Even governments around the world are making greater use of gold in international financial affairs. Over time, gold has undergone three major transitions: 1. Gold was a medium of exchange in the early civilization 2. Next, an international banking system was developed around it, in which paper money was fully convertible into gold 3. This convertibility was ceased in 1971 by the then president Richard Nixon and a purely fiat money system took its place.
Early civilizations equated gold with gods and rulers. Humans almost intuitively place a high value on gold, equating it with power, beauty and cultural elite. And since gold is widely distributed all over the globe, we find this same thinking about gold throughout ancient and modern civilizations everywhere. And because of this very basic reason, gold is hovering around $1700 per ounce, even when the US departed the gold exchange standard long back. As per the statistics, today 61% of gold demand is for jewellery

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