While there are many investment options in gold, like gold coins and bars, gold ETFs, gold mutual funds, sovereign gold bonds (SGBs), etc., can these assets be a reliable source of passive income for senior citizens post-retirement? Historically, gold has performed well, especially as a hedge against economic downturns. But most importantly, the yellow metal has been intrinsically part of the Indian cultural sphere, where buying gold is considered auspicious during festivals. 

Gold demand skyrockets during festivals like “Karwa Chauth,” “Diwali,” “Durga Puja”, “Pongal,” “Onam,” “Ugadi”, etc. India is one of the world’s largest gold consumers and considers the yellow as both investment and cultural value. According to the Gems and Jewelry Export Promotion Council (GJEPC) of India, gold jewellery demand surged 7 per cent to 155.7 tonnes in Q3, 2023 from 146.2 tonnes in Q3 last year. 

Amol Joshi, founder of Plan Rupee, a financial planning and investment firm, says, “Gold is an essential component in asset allocation along with debt and equity assets. Gold is also traditionally used as a hedge against inflation. In periods of uncertainty, gold prices have held up and provided respite to investors making a case for its place in the portfolio.” 

So, should seniors invest in gold for passive income? Here are two things to consider.

Should Seniors Invest In Gold For Passive Income? 

Seniors usually prefer the safety of the invested amount and guaranteed income. When inflation is high or the market is uncertain, gold prices typically move up. Also, during geo-political tensions, when other asset classes like stocks, bonds, etc., tend to fall, gold remains steady.  

Understandably, most experts encourage people to hold gold assets in their portfolio for diversification and stability, as gold prices are less volatile than stocks and bonds. 

Gold Investment Opportunities

However, investors must also consider that while gold can handle inflation, it may not offer higher returns than other assets. Barring SGBs, no other gold investments provide guaranteed regular income. So, gold might offer limited options for passive income. Instead, it can be an avenue to store than a stable income source. For seniors who prefer fixed deposits (FDs) for regular income, gold may not offer the same benefit. If steady cash flow is not what they want, they may consider gold for long-term protection against market volatility.

Joshi adds, “For seniors and retirees, they need income certainties like FD interest, rental income, mutual fund SWPs (systematic withdrawal plans), or annuity. Gold does not generate certain (fixed regular) income and hence not recommended for passive income.” 

At the same time, senior citizens living on their savings must know that no single asset class can fulfil all their requirements, like guaranteed income, inflation hedge, inflation-beating returns, etc. FDs can be suitable for regular returns but may not beat inflation; gold is a hedge against inflation but can’t give regular returns, and equities can beat inflation but are too risky.   

With Diwali around the corner, many people, including senior citizens would buy gold. However, they should remember that while the precious metal can add sheen to their portfolio, it may not be a robust source of passive income. SGBs, which offer 2.5 per cent guaranteed interest, are the only gold instruments that provide guaranteed regular income. However, it may not be adequate to sustain post-retirement financial needs, given the inflation at over 5 per cent.   

So, while investing in gold, Joshi suggests, “Better idea is to make it a part of asset allocation & rebalance annually”.