Yahoo Finance Digital gold: Why Indians are investing in it
Gold was the foundation of the global economy as we know it today, serving as both a form of currency and wealth. For Indians, this precious yellow metal has been a store of value for over 3000 years, much longer than any currency anywhere.
In India, gold is more than a mere metal - it holds high emotional and social value and any auspicious occasion includes purchase of gold. No wonder, India is the largest importer of Gold in the world today.
According to reports, Swiss gold accounted for almost half of India’s imports of the yellow metal, at US$16.3 billion, in 2020-21. India imported gold worth US$ 34.6 billion last fiscal against US$ 28.2 billion in the previous year despite the raging COVID-19 pandemic.
Indians are now also investing in Gold as a financial diversification of an investment portfolio as it helps in hedging inflation risk, currency risk, and market volatility.
New age investment instrument
Gold mutual funds and Gold ETFs (exchange-traded funds) have been around for some time now. But Digital Gold is the new buzzword and Indians are making a beeline for it, considering the uncertain times created by the COVID-19 pandemic.
What is Digital Gold? It is a new age investment instrument that allows you to invest in 24 carat pure gold, which is then stored in secure world-class Brinks vaults under your ownership. If you wish to take possession of the same, you can redeem digital gold for 24 carat/ 999.9 pure gold coins and ingots. Customers will soon have an option to convert digital gold into physical coins and have it delivered anywhere in India.
Unlike Gold jewellery and coins purchased traditionally, where the risk of storage lies with the owner, Digital Gold allows you to transfer the hassle of security to the seller. Your gold is safely held in insured, and secured vaults while maintaining the transparency of your transaction. Moreover, the transaction happens at market prices; hence there is complete transparency during trading.
The most significant benefit of digital gold is that investors can benefit from the security and traceability of blockchain transactions. All the documentation travels from owner to owner with each transaction. Each transaction is digitally signed and timestamped. There is no possibility of buying fake digital gold.
How to Buy
You cannot directly invest in Digital Gold as you need an authorised third party. When you place an order for Digital Gold with the authorised trading companies, they buy the corresponding amount of gold and place it in a vault on your behalf. A 3 per cent Goods and Services Tax (GST) is applicable.
Likewise, when you wish to sell your digital gold holdings, the trading company will sell the gold at the prevailing market price and deposit the amount to your account. The process is entirely digital and safe. At no point, the investors are handed physical gold.
In India, the authorised trading companies include MMTC-PAMP, SafeGold, Augmont and Upstox. While MMTC-PAMP is a joint venture between Switzerland based bullion brand, PAMP SA, and MMTC Ltd, a Government of India undertaking, Upstox (also known as RSKV Securities India Pvt Ltd) is one of India’s leading and fastest-growing brokerage firms. SafeGold belongs to Digital Gold India Pvt. Ltd and Augmont has its own refinery that is accredited by BIS and NABL (National Accreditation Board for Testing and Calibration).
One can use any of the e-wallet platforms like Google Pay, Paytm, and PhonePe to make the purchase. Investors can also invest in digital gold through HDFC Securities, Bajajfinserv, and Motilal Oswal. All these websites and companies are only a platform for the trading companies.
The maximum amount of investment is limited to INR 2 lakhs on most platforms. The trading companies have a maximum holding period, after which the investor has to sell the gold or convert it into physical gold. MMTC-PAMP has a maximum holding period of 5 years.
Traditional gold investors may need some time to come around to the idea of Digital Gold over a physical asset. However, when considering the challenges of holding physical gold, the benefits of digital gold are quite obviously apparent.
However, a word of caution. For gold ETFs, there is the Securities and Exchange Board of India (SEBI), for gold bonds, the Reserve Bank of India (RBI) is the regulator, while in case of digital gold there is no regulatory body.
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