Welcome Finance Enthusiasts !!

In the popular Netflix show Money Heist season 3, after Rio is captured, Tokyo turns to Professor for help. To rescue Rio, Professor puts into action his brother Berlin’s plan to rob the gold reserves from the water-logged vault of the Bank of Spain (Central Bank of Spain). Ever wondered why there was such a huge quantity of gold in the Bank in the first place. If you are thinking about the collateral against a gold loan then you are wrong. Well not just Spain, every country maintains its own reserves of gold to hedge against inflation and economic uncertainty.

Around April’24, gold prices touched an all-time high. The primary reason is that investors turn to yellow metal when the global economic situation projects a volatile future. The secondary reason is that the Central Banks are buying gold to increase their gold reserves during war and geopolitical tensions. Gold is a physical asset that never depreciates. It is a scarce resource which becomes more valuable over time.

The Central Bank is the custodian of the country’s reserves. The Federal Reserve (Central Bank of U.S) has the largest gold reserves which account for almost 80% of its total foreign reserves. RBI maintains foreign currencies, gold reserves and Special Drawing Rights (monetary claim rights held by IMF members). You can check the Indian Forex reserves on the RBI website.

Silver is an auspicious metal but it is nowhere used as currency. So why is silver seeing a surge in its price? Silver in addition to ornamental value has industrial uses. It is fundamentally used in the EV sector, solar panels, and 5G networks. There is a boom in the EV sector, the heatwaves in the country have pushed the energy demand and 5G is in rapid adoption. All these factors contribute to the rise in silver prices.

Including both metals in one’s asset class is a good option to safeguard oneself from uncertain economic situations. Investors are turning to Gold and Silver ETFs, Gold mutual funds and, Sovereign Gold Bonds (SVB) to invest in e-gold instead of physical holding. A gold or silver ETF is a fund that invests in the bullion market to track the performance of the metals prices. On the other hand Gold mutual funds invest in the units of Gold ETF and other underlying assets. One can invest in Sovereign Gold Bonds when the government opens subscription for a period of 8 years. Investors can exit/redeem after the 5th year. They provide an annual interest rate of 2.5% and capital appreciation at the end of the tenure. It is a safe and convenient way to invest in the precious metal class without the burden of safekeeping those assets.