Skyline University Nigeria

Factors Inducing Investment Decisions in Gold


Every person’s preference for future consumption over present consumption, their expectations for future income, and to some extent the interest rate, all have an impact on how much they save. The amount of money it safeguards directly relates to the financial progress. Savings are responsible for boosting of economy in the country. People may invest their savings and build wealth through options such as fixed deposit, mutual funds, stocks, bonds, properties and gold and silver. Diversification of investment help the savings to grow and may lead to greater the amount of capital available for investment. Money does not have any increment unless if it is invested in some proposals. Investment decision differ from one investor to other depending upon their risk bearing based on long term or short term. Gold is the most valuable asset in the economy.

Gold may be baptized a hedge against inflation or reservoir for future use or substitute for the currency notes which are used as a means of transfer or exchange. Gold to the investors in recent years has been important mainly because of rise in prices due to inflation. It has been used more for speculation rather than for a long-term investment and for quick profits. Gold is popularly known as ‘yellow metal’ can be invested into either in the form of Gold jewelry, Gold bars, Gold coins, Gold ETF (exchange-traded fund), GSB (Gold Sovereign bonds) and GDS (Gold Deposit Schemes).

Applicable Factors to be considered on Gold Investment

  • Options available in gold investment
  • Gold bullion market activities
  • Exchange value
  • Demand and Supply of gold
  • Higher risk protection other than investment options
  • Future security
  • E-Gold
  • Reliability of schemes
  • Actions of (ETF) electronic-traded funds

International factors on Gold

The worldwide spot price of gold is a factor in determining the metal value of gold because the majority of the gold in any nation is imported. The London bullion market is where the spot price is set. The price of gold will increase if the spot price does, for some reason. Additionally, other global circumstances, such as war and peace, which influence the movement of gold prices globally also have an impact on domestic gold prices.

Demand and Supply decides the price of Gold

Demand and supply principles direct the pricing of all goods in an economy and gold is no exception. The price of gold will increase, it affect the demand too. This behavior of investors can be seen during holidays, wedding season, or following a successful good monsoons that benefits the rural population. The amount of government reserves in the country has an impact on the gold supply. The price of gold will grow if demand remains constant and the Central Bank sometimes purchases additional gold since it is accepted as an equal to foreign commercial money for the issuing of new currency notes.

Adjusting risk in Investment portfolio

When other securities markets crash, diversifying an investing portfolio also helps when we include gold as investment option. In challenging market circumstances, gold is crucial for recovering losses. An investor can modify the risk-to-return ratio in their investment portfolio with the use of gold investments. As a result, investing in gold is a wise choice, but there are certain considerations to make before. The main benefit of investing in a liquid asset like gold is its price stability. Compared to other assets, it is simpler to convert into cash. Reselling is therefore a crucial component for which appropriate measures should be made to guarantee that the investment realizes the highest resale value when necessary.


Gold investments are known to protect against inflation and economic uncertainty. Gold is one of the alternative investment strategies that plays a significant role in an investor’s portfolio. In fact, gold investors now believe that investing in gold has a significant impact on economic growth. In the decision to invest in gold, sentiment is the influenced factor, while safety is the heavily influenced factor. Gold investors place safety first, followed by risk management, mortgage instruments, liquidity, trustworthiness, assured return, market dynamics, and sentiments, as their lowest priorities.


  1. Bishesh Thapa (2020), Factors Influencing Investment Decisions in Gold , Journal of Business and Social Sciences Research, Issue-2,Vol-5, Dec2020,pp-62
  2. Gowri Nair, and Pavithra, (2015), “A study on investment behavior with special reference to Kollam corporation”, Global Journal for Research Analysis, Vol.4, Issue:8, August, pp.194
  4. S Amudhan, J Poornima, S Senthil Kumar,  “A study on individual investors satisfaction level of existing investment schemes in Salem districts”, South Asian Journal of Marketing & Management Research , Issue-3, Vol-6, 2016 pp.31

Dr. S Senthil Kumar is currently working as Assistant Professor in Finance and Management, Skyline University, Nigeria. His qualifications are MBA, M.Com, M.Phil, MS, and PhD.

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