Gold Investment Return Calculator
Calculate your profit and CAGR for gold investments
How to Calculate Gold Investment Returns?
Investing in gold has historically been a hedge against inflation and economic uncertainty. However, to understand if your investment has truly performed well, you must look beyond the simple price increase. You need to account for secondary costs like making charges, GST, and the duration of your investment.
The Mathematical Formula
The calculator uses the following steps to determine your gold ROI:
- Total Investment: (Purchase Price × Weight) + Making Charges + Taxes.
- Current Value: Current Market Price × Weight.
- Absolute Return: ((Current Value – Total Investment) / Total Investment) × 100.
- CAGR (Compound Annual Growth Rate): [ (Current Value / Total Investment) ^ (1 / Years) – 1 ] × 100.
Understanding Making Charges and Taxes
When buying physical gold (jewelry or coins), you rarely pay just the market rate. Jewelers add "making charges" which can range from 3% to 25%. Additionally, government taxes (like GST in India) are levied on the total value. When calculating your return, these must be added to your initial cost, as they effectively lower your profit margin.
Is Gold a Good Long-Term Investment?
Gold usually offers steady growth over long periods. While it might not match the explosive returns of the stock market during bull runs, it provides stability during crashes. A CAGR of 8-10% is often considered a healthy return for gold over a 5 to 10-year window.
Example Calculation
Suppose you bought 20 grams of gold at 5,000 per gram 4 years ago. You paid 5,000 in making charges. Your total investment was (20 * 5000) + 5000 = 105,000. If the current price is 6,500 per gram, your gold is worth 130,000. Your absolute profit is 25,000 (23.8%). Your CAGR would be approximately 5.48% per year.