Gold Investment vs Fixed Deposit

Gold Investment vs Fixed Deposit

People typically regard gold and fixed deposits as risk-free investments. Nevertheless, the value of gold is always in a state of flux. By contrast, the returns on fixed deposits are assured. Preserving and investing for the future is a long-term venture. Everyone will encounter gold and fixed deposits as possible investment choices at some point in life.

In recent years, gold prices have seen a sharp climb, making it difficult for individuals to allocate resources to both assets, resulting in a need to choose only one. Before investing, one should consider the rate of return they will get from these two investments over an extended period.

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Gold Investment

Gold Investment vs Fixed Deposit

Gold has been used as a form of investment for centuries, with its use as a medium of exchange dating back to at least 600 BC. The Egyptians used gold in jewelry and as a currency, and the Romans also had a system of gold coins. Gold was also an important part of the economies of the ancient Chinese and Indian civilizations.

Gold was used as legal tender in the United States until 1933 when President Franklin Roosevelt took the nation off the gold standard. Gold has been used in jewelry and other decorative items since ancient times. Artisans have created intricate and beautiful pieces that are still admired today.

Gold investment has become increasingly popular in recent years due to its status as a haven asset and store of value. In times of economic uncertainty, investors often look to gold as a reliable store of wealth and a hedge against inflation.

Gold has historically outperformed other asset classes such as stocks and bonds in economic turmoil, making it an attractive option for investors looking to diversify their portfolios.

According to experts, gold should make up between 5 and 15 percent of your portfolio. This is because gold offers many benefits and is a very flexible investment choice.

Fixed Deposit Investment

Gold Investment vs Fixed Deposit

A fixed deposit (FD) is an investment where a lump sum of money is placed with a financial institution, such as a bank or building society, for a predetermined period. During this period, the investor agrees not to withdraw the funds and in exchange, the financial institution pays them a fixed interest rate at regular intervals.

The key features of a fixed deposit include:

  • A predetermined term: This is the length of time for which you are willing to commit your money. Fixed deposits usually range from one month to five years but can sometimes go longer.
  • A predetermined rate of interest: This is the rate of interest that will be earned on the fixed deposit. The interest rate can vary depending on the length of the term and the amount deposited.
  • Capital security: Fixed deposits are considered a safe investment because of the full faith and credit of the financial institution backing them. This means you are guaranteed to get your principal amount plus any accumulated interest at the end of the term.
  • Liquidity: Fixed deposits usually have a fixed, predetermined term and it may not be possible to withdraw the money before the maturity date. However, some financial institutions may allow you to break the fixed deposit before maturity, although this may result in a penalty or loss of interest.

Gold Investment vs. Fixed Deposit: How Do They Differ?

Gold Investment vs Fixed Deposit

Gold and fixed deposits (FDs) are viable options for investors looking to build their portfolios. Both are very safe investments and offer protection regardless of market performance. The decision between investing in gold and FDs largely comes down to a few important factors:

Rate of Return

Gold is considered a safe-haven asset and its value generally appreciates over time. The rate of return you can earn when investing in gold will depend on the current market price and the amount of money you invest. Generally, gold investments provide a steady return, with a long-term return of around 5-10% per year. However, short-term returns may be higher or lower depending on the market.

Fixed deposits offer investors a guaranteed rate of return set by the financial institution offering the deposit. These rates are usually higher than the rate of inflation and can range from 3-8% depending on the length of the deposit and the amount of money invested. Fixed deposits tend to be more stable investments than gold since the rate of return is known and guaranteed in advance.

Risks Involved

As previously stated, both gold and fixed deposits are low-risk investment options. Although the cost of gold may go up and down quickly in the short run, it has maintained its worth in the long run. For a long time, gold has been a safeguard against inflation and the weakening of major currencies, making it an advantageous investment.

Meanwhile, fixed deposits (FDs) offer assured returns unaffected by external elements, though the return amount depends on the duration chosen. The longer the tenure, the higher the return.


Regarding liquidity, gold is preferred by those seeking rapid buy-in. Gold investment opportunities include digital gold, ETFs, mutual funds and sovereign gold bonds, which provide returns with less risk and bothersome storage and purchase expenses. Nonetheless, profits from gold will be contingent on the market state, so investors should be mindful of the market before buying and selling gold.

For fixed deposits, liquidation depends on the financial institution and its deposit regulations. It is possible to cash out the FD before its maturity, but many firms impose a penalty for early withdrawals. If you may require the money before maturity, search for companies that permit penalty-free early exit on FD investments.


With gold investments, you can buy and sell your gold anytime, allowing you to adjust your portfolio as needed. You also can trade in different forms of gold — from coins to bars to ETFs — giving you more ways to diversify your investments.

On the other hand, fixed deposits require you to lock in a fixed amount for a predetermined period. While this means that you can't make any changes to your investment during the fixed period, it also provides security in knowing exactly how much money you can expect to get back when the deposit matures.

Loan Collateral

Fixed deposits are less volatile than gold investments and are often fully covered by government guarantees and insurance policies. This makes them a safer option for loan collateral when compared to gold. In addition, fixed deposits are typically easier to access since the funds are already in the bank's possession.

However, the returns on fixed deposits are usually lower than those of gold investments, so if you are looking for higher returns from your loan collateral, gold may be a better option.


Gold investments are subject to capital gains tax, which is determined by the holding period of the investment. Short-term investments (held for one year or less) are taxed at ordinary income rates, while long-term investments (held for more than one year) are taxed at a lower rate.

On the other hand, fixed deposits are not subject to capital gains tax, as they are classified as non-taxable deposits. However, interest earned from these deposits is subject to federal income tax and may also be subject to state and local taxes, depending on the jurisdiction.

Types of Gold Investments

Gold Investment vs Fixed Deposit

There are different gold investments, each with its benefits and drawbacks. It would help if you chose a gold investment based on your specific needs and goals.

Here are some of the most popular types of gold investments:

Gold Futures

A gold futures contract is an agreement to buy or sell a specified amount of gold at a predetermined price on a future delivery date. These contracts are standardized by a futures exchange, such as the New York Mercantile Exchange (NYMEX) and are settled daily in cash.

When investing in gold futures, you enter a binding agreement to buy or sell a specific amount of gold at a predetermined price on a designated future date. When the contract expires, you must either take delivery of the gold or pay the difference between the contracted price and the current market price.

Investors may choose to invest in gold futures either by taking a long position (speculating that the price of gold will rise) or by taking a short position (speculating that the price of gold will decline).

Mining Stocks

Gold mining stocks are shares of companies that produce and sell gold. These stocks can be bought and sold on major stock exchanges, such as the New York Stock Exchange (NYSE) or the Nasdaq.

When you invest in gold mining stocks, you buy a piece of a company that produces and sells gold. The company's profits are determined by the amount of gold it sells and the price at which it can sell it. Gold mining stocks can provide investors with potential long-term capital gains, as well as potential dividends.

Physical Gold

Physical gold comes in various forms, including coins, bars, jewelry and collectibles. Coins are usually sold in sizes ranging from 1 oz to 1 kilogram. Government mints, such as the United States Mint, Royal Canadian Mint or the Perth Mint typically produce them.

Coins are attractive for investors because they are relatively easy to store and transport and come with a guaranteed weight, purity and legal tender value. Coins may also be purchased through dealers and online brokers.

Gold bars come in various shapes and sizes, including the popular 1-ounce and 10-ounce sizes. Bars are typically produced by private refiners, such as PAMP Suisse, Johnson Matthey or Credit Suisse. Gold bars can be purchased from dealers or online brokers.

Gold jewelry is another option for those looking to invest in physical gold. Jewelry pieces are usually made from 14k or 18k gold (58.3% and 75% pure gold, respectively). When purchasing jewelry, investors should make sure to check the karat stamp on the piece, as well as its weight. Jewelry can be purchased from jewelers or online retailers.

Exchange-Traded Funds (ETFs)

ETFs are a type of investment that tracks the price of gold, allowing investors to gain exposure to the commodity without having to own it physically. ETFs are structured as open-ended funds that can be bought and sold on a stock exchange. ETFs are similar to traditional mutual funds but differ in that they are traded like stocks.

When investing in an ETF, investors purchase shares of the fund, which are then used to purchase the underlying asset. For example, if an investor is looking to invest in gold through an ETF, they would buy shares of the ETF, which the fund manager would then use to purchase gold.

As the price of gold fluctuates, the value of the ETF also changes. Investors can then buy or sell the ETF on the stock exchange, just as they would a stock.

ETFs allow investors to purchase a basket of assets that closely mirror the composition of the underlying asset such as gold. ETFs typically have lower costs than mutual funds since they are not actively managed.

ETFs are also more liquid than other types of investments, making them attractive to investors who want to buy and sell their holdings quickly. They allow investors to diversify their portfolio by investing in gold without having to take physical possession of the commodity.

Gold Investment vs. Fixed Deposit: Which Investment Should You Go For?

Gold is generally considered a better investment than fixed deposits because it has historically provided investors with a higher rate of return over the long term. This is due to a few factors. Firstly, gold has a much lower correlation with other asset classes, meaning that it tends to perform differently than stocks or bonds in times of market volatility.

Secondly, gold's inherent value is not dependent on the performance of any other asset, so it can provide a reliable store of value during times of economic uncertainty. Finally, gold has traditionally been a haven asset, protecting investors against inflation and currency devaluation.

On the other hand, fixed deposits are typically seen as low-risk, low-return investments. Returns on fixed deposits are determined by interest rates, which are largely dependent on prevailing economic conditions.

This means that the returns from fixed deposits can be more volatile than those from gold and other investments. Fixed deposits also lack the diversification benefits of gold, making them more susceptible to economic shocks.

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