Is gold still a good investment at this price? Investors should assess every factor behind its rise

The intraday price of gold hit an all-time high of $5,595 per troy ounce in late January, having nearly doubled within the span of a little over a year. On the same day, in rupee terms, gold of 24 Karat purity recorded a price of ₹183,000 per 10 grams, having risen 134% over the same period thanks to the combined effect of its price gain and the rupee’s depreciation. Silver, the metal’s younger sibling, sparkled almost as much during the same period.The sharp rise of gold and its moderate correction since has every investor asking what is going on.

What next for this metal? Should one have had gold as a chunky part of one’s investment portfolio? Have we missed the bus? These questions are from investors everywhere, but particularly in India where we think we have an edge of familiarity since we grew up with gold in our households. New York University professor Aswath Damodaran has a nice framework to think about what investments should go into an asset-allocation portfolio. In an excellent Substack blog on the topic of gold, he says that investments may be classified into four categories.

One, assets like equities and bonds that generate cash flows. Two, commodities like copper that are useful in industrial production. Three, currencies that are a medium of exchange or a store of value.

Four, collectibles like art or wine, which as the name implies, is for emotional or aesthetic value. Gold is an interesting combination with features of a commodity, currency and collectible. However, its longstanding appeal for investors, households and central banks has been as a collectible.

Gold does not have a ‘yield’ or cash flow associated with it. There is also a small cost of warehousing physical gold. Gold has retained its