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Which is a Better Investment Gold or Fixed Deposit?

Jagrity Sharma Jagrity Sharma 22 August 2019

Both, gold and fixed deposits are generally considered risk-free investment options. However, the investment made in gold fluctuates constantly. On the other hand, returns on fixed deposits are guaranteed.

Better investment option gold or fixed deposit

Saving and investing is a long-term process. You will have to save money regularly for better a better future. Gold and fixed deposit are two investment options which almost everybody considers during his/her lifetime. However, in recent years, gold prices have risen too fast, and that is why many people cannot invest in both asset class, and they have to choose between one of them. Before investing, it is advisable to compare a few aspects, including the rate of return you get from these two investments over a period of time.

Market Influence and Safety

The market for gold constantly fluctuates since gold is an internationally traded commodity. Import and supply of gold depends on price of the US dollar, and international trade relations also impact gold prices. While there are opportunities to gain, a fall in the market could lead to a situation where your cash is stuck in a gold investment. Fixed deposit, on the other hand, provide returns that are entirely independent of market influence. Moreover, company fixed deposits also have a safety rating so that you can compare from several options and choose the highly creditworthy one.

Rate of return

Gold investments may offer you a reasonable rate of return. However, the import of gold in India over the years, from 2012 to 2017, has resulted in gold inflation. The government has taken measures to reduce gold inflation, and as a result, the prices of gold have fallen considerably. Investment in gold is worthwhile as it has given inflation-beating results in the past. However, the dark side is, there is an appreciation in the value of gold because there is a devaluation of the paper currency. Hence, the returns become nominal in the case of gold investment. Fixed deposit, on the other hand, continue to provide fixed returns that are locked-in for the investment term. The returns are guaranteed, irrespective of the amount that you deposit. Interest rates are higher for senior citizens as compared to other customers.

The flexibility of term

In the case of gold investment, you can invest in gold ETFs, gold equity or gold bullion. The duration of each depends on the type of investment you choose. Fixed deposits also offers flexible terms. You can select a term between 7 days to 10 years, depending on your requirements. However, the flexibility of the investment term would depend on the terms of the FD providing bank or NBFC. Generally, a short-term fixed deposit helps to beat inflation.


Gold investments can be done through a range of options like equity, mutual fund and bullion. It offers excellent liquidity. While you may be able to sell physical gold quickly, there is a possibility of incurring loss. The return depends on current market situations. In case of a fixed deposit, the liquidity depends on the terms of the financial institution. Premature withdrawals, here, are subject to penalty.

Income generation

Fixed deposits can end up being another source of income for you. You can choose the frequency of interest income you wish to receive. Alternatively, you can opt for a cumulative fixed deposit in which the interest is reinvested to earn better returns. On the other hand, gold does not generate any income. Gold is an asset whose performance depends on the external factors. It is not productive on its own.

Loan against investment

Both gold and fixed deposit can help you to avail loan of about 80% of its value. You can take a loan against your respective gold and fixed deposits from banks and financial institutions at competitive interest rates. The interest rates charged on such loans are generally lower than interest rates charged on the personal loan.

Income tax

Returns on fixed deposit are fully taxable. However, banks also offer tax-saving fixed deposit, which comes with a lock-in period of five years. You can claim tax exemption for investment up to Rs. 1.5 lakh per year under Section 80C of the Income Tax Act, 1961. From a liquidity perspective, it may be noted that a five-year fixed deposit for a tax-saving purpose will not allow withdrawals before maturity.

Fixed deposit is considered to be the most secure investment option in India. The government backs it and provides you with a fixed rate of return on the amount invested. Not only does it carry lesser risk than gold, it is also gives guaranteed returns. All leading banks in India offer a fixed deposit facility to customers. Post digitalization of the banking sector, you can avail most of the banking services online. It has become easier to invest money through online fixed deposit facility.

Why should you invest in an online fixed deposit?

  • Online fixed deposit facility helps you choose from several options effortlessly. Many banks offer a facility to open an online fixed deposit account through net banking. Moreover, you can compare interest rates and benefits offered by different bank NBFCs and choose the one that provides the highest rate of interest.
  • You can easily apply for an online fixed deposit account by transferring money digitally. You can also link your bank account from where the funds are automatically transferred to the online fixed deposit account.
  • The returns on fixed deposit may not be as high as market-related investments, but it is the most reliable investment avenue that also offers regular income. Banks and NBFCs with high credit ratings provide you with enough security for your FD. Both fixed deposit and gold have their own set of rules for investment. They have been traditional investment avenues in India and have remained popular across decades. As you rebuild or balance your investment portfolio, you may come across these two options and evaluate them based on your financial goals. However, considering multiple aspects, fixed deposit is better than gold in the long run.

When it comes to the safety of your investment, fixed deposit outshines the other investment options. Investing in fixed deposit is a better option as FDs give guaranteed returns and are not affected by market fluctuations.

Recommended Read: Will FD Interest Rates Increase In India?

Jagrity Sharma
Written by Jagrity Sharma
A bibliophile who hates alliterations, but loves cream, comics and content immensely! On another note, a content marketer who leverages the power of words to explain...almost anything!