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India, simply put, is infatuated with gold and diamonds. Diamonds are thought to have been first recognised and mined in India around 6000 years ago as precious gemstones, and, needless to say, we have a long standing history with the radiant mineral.

As far as gold is concerned, lets just say that it would be difficult to decide whether Indias love affair is higher with cricket or gold. Gold, as the adage goes, is truly timeless.

However, we have reached a period of time in history where amazingly, due to clever marketing and brilliant advertising, it has become difficult to answer questions as:

Is it better to invest in diamonds or in gold?

What are the benefits associated with diamonds and gold?

How do I compare the true, intrinsic value of diamonds versus the value of gold?

Gold has stood the test of time for thousands of years and continues to make for an excellent investment today. The same, however, cannot be said for diamonds, which have been artificially marketed and advertised to lure the public into believing that they make for good investments.

Gold stands the test of time

Gold is not just a precious metal to India, but a part of its culture. As a metal that transcends intrinsic values and investment opportunities, gold might be the sole item that permeates every strata and class of our society. It is equally sought by a wealthy urban businessman or a poor farmer in a village. It permeates our religious, cultural and day-to-day lives in numerous ways, which perhaps best explains why India is the worlds largest consumer and importer of gold.

In 2012, India consumed 800 tonnes and imported 951 tonnes of gold. India buys 25 per cent of the worlds gold. To put that in perspective, India consumes almost 6 times the amount of gold than the United States.

With that being said, there is also a perfectly logical reason as to why India clamors towards investing in gold: the yellow metal has stood the test of time as one of the safest and wisest investment options. There are many reasons that make acquiring gold such an enticing and smart investment decision.

Gold has appreciated 501 per cent from 2001-2012, which comes out to an annualised return of almost 18 per cent.

Lets take a look at few figures which show the yearly appreciation in gold prices (in US dollars):