Which Is A Better Investment Option, Gold Or Fixed Deposit?

Save & Invest

An investment is made for a better and safer future. In recent times, the investment market has been very volatile. Because of this volatility, some people have temporarily stopped their investments or are looking for a safer investment option. If you also don’t want to take unnecessary risks, investing in low-risk assets might be a better option.

Generally, fixed deposits (FDs) and gold investments are low-risk investments. Because these two investments ensure proper and timely returns, they are the most popular ones. Though the gold investment market is a little volatile, it has cultural significance in India.

In a fixed deposit, you can deposit an exact sum of money in the bank, and upon maturity, you will get a lump sum with high interest. The money in an FD is invested at a fixed interest rate for the tenure of your choice.

Now that we’ve defined gold investment and fixed deposits, let’s see which is a better investment option: gold or a fixed deposit.

Gold Investments vs. Fixed Deposits (FD)

  1. Risks

Both gold and FDs are considered low-risk or no-risk investments. While gold prices can fluctuate in the short run, traditionally, they have been the safest option. In terms of economics, gold has always acted as a hedge against inflation and helped prevent major currencies from losing their value. So, the investment in gold has its own unique value.

If we talk about FDs, they have guaranteed returns and aren’t affected by market volatility. But the interest rate and returns largely depend on your chosen tenure. The longer your tenure, the more and higher the return on your FD.

  1. Rate of Return

Gold investments, being traditionally and culturally significant, offer a higher rate of return than FDs. Gold has always been considered one of the safest investment options. 

On the other hand, fixed deposits are invested for a fixed period at a fixed interest rate. The bank sets the interest rate at the time of opening the account. So, in FDs, the return is guaranteed, but the interest rate is lower than gold interest. The plus point of FDs is that banks provide slightly higher interest rates to senior citizens (0.50%–0.75%).

  1. Liquidity

Liquidity means the ability to convert your assets into cash or acquire cash (via a loan). When it comes to liquidity, nothing compares to gold. Investors and buyers always prefer gold. Over time, the investment in gold has become more diversified. Other than holding physical gold, now you can invest in digital gold, gold ETFs, gold mutual funds, and sovereign gold bonds, to name a few. These investment options give you excellent returns and liquidity without the headache of storing gold in your home.

While the returns on gold are great, they largely depend on the market situation. So, you need to be informed before buying and selling gold. On the other hand, in FDs, the liquidity completely depends upon the bank in which your FD lies. 

The other downside of FD liquidity is that if you want to liquidate your FD before maturity, you may need to pay a penalty. So, try to find a bank with a penalty-free exit on your FD. 

  1. Loan Against Investment

Both gold and FD investments offer a loan of up to 80% of the value. You can easily get a loan against your FD or gold investment from your bank or NBFC partner. The interest rate for this type of loan is usually lower than the interest rate for personal loans.

  1. Income Generation

Gold investments are designed as an income source. Gold is an asset that accumulates wealth over time and acts as a hedge against inflation. 

Whereas, with fixed deposits, you can choose the frequency at which you receive the interest. This interest can serve as an alternative income source for you. If you don’t wish to take the interest generated from the FD, you can reinvest it to get better returns upon maturity. 

  1. Taxation

The returns gained from gold investments come under capital gains; thus, you can get indexation benefits. 

On the other hand, interest earned from FDs attracts taxation. Though banks offer tax-saving FDs, they come with a lock-in period of five years. You can’t break that deposit or withdraw from it during those five years. However, if your investments are under Rs. 1.5 lakh, you can claim tax exemption as per Section 80C of the 1961 IT Act.

ParametersGold InvestmentFixed Deposit
RisksProne to some market riskNo Market Risk
Rate of ReturnHighLow
Loan Against Investment~80%~80%
Income GenerationNoYes


In our analysis, we found that gold investments have better returns but are prone to some market risks. On the other hand, we see that fixed deposits have lower returns but are more secure against fluctuations. Both of these investments provide guaranteed returns. 

So, if you want better tax benefits, more flexibility, and higher capital gains, you should go for gold investments. On the other hand, if you like to play it safe and receive interest on your investments, the fixed deposit would be a better option for you. You can fix your finances in a period of 7 days to 10 years. 

Therefore, depending on your liquidity requirements, financial goals, and risk-taking ability, choose the right investment mode for yourself. 

Visit Piramal Finance’s official website to gain better investment insights. You can also read various blogs posted on their website. Do not forget to explore the various products and services they offer.