In 1947, an aeroplane ticket from Mumbai to Delhi cost more than gold. Petrol was less than 30 paise. A litre of milk was priced at 12 paise. The price of a bar of soap was 56 paise. Everything was different. The steady increase in the prices of gold, however, did not change.
Over the years, gold has become a prized asset for investors. One of the most revered investment options, gold can beat inflation. When the Quit India Movement was at its prime, in 1942, the price of 10 grams of gold was Rs. 44. This price had doubled within the next five years–i.e., by 1947.
India had achieved independence and with that, the prices of gold had also started to increase. 10 grams of gold was valued at Rs. 88. Between the years 1950 and 1960, gold gave around 13 per cent return to its investors.
What was causing such a steady increase in its price? How had the yellow metal turned into a form of investment?
Gold is used to hedge inflation. When inflation is high, the prices of gold keep skyrocketing. The same thing happens the other way round. India is one of the largest importers of gold in the world. If the prices fluctuate in the global market, the same happens in the valuation of gold at home. Interestingly, the yellow metal is dollar-denominated. So, the US dollar’s valuation hugely impacts the price of the bullion metal. A stronger US dollar tends to keep the prices more stable.
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