Research Presentation
Understanding Gold as An Asset Class in India
Gold plays a dominant role in the portfolio of Indian households. Financial policy in India has persistently tried to incentivise households to switch away from physical gold through import duties, quantity limits, and taxes, and towards financial products based on gold such as gold ETFs and sovereign gold bonds. However, households still seem to continue with their preference for physical gold, though the popularity of gold ETFs is also on the rise. Despite the importance of gold in household portfolios, there is no systematic study of gold as an asset class under Indian macro and financial conditions. This project aims to investigate the properties of gold as an asset class that may contribute to its place in portfolios of Indian households.
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In doing so, it focuses on:
- The long-term returns on physical gold and gold ETFs,
- The performance of gold vis-a-vis other asset classes such as fixed deposits, and equity, especially in times of extremely volatile market conditions, and consequently its role in diversification and
- The relationship between gold and inflation, especially in times of high inflation that were characteristic of India prior to the inflation targeting regime. This analysis will help shed light on the market for gold, and explain some of the Indian households’ preference for gold.
Researchers
Dr. Renuka Sane
Associate Professor
NIPFP
Mr. Manish K. Singh
Assistant Professor, Department of Management Studies
IIT-Delhi