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Shift towards digital gold on the rise in India

Experts point out digital gold is considered safer and less expensive than real gold


With Onam and Raksha Bandhan round the corner, digital gold platforms and companies are seeing increasing traction among customers and are banking on the concept of digital gold as an investment option. This trend is being seen particularly among millenials as per many platforms offering digital gold as a service. Experts say that though physical gold used to see traction around festivals, digital gold investment has seen increasing trend round the year. The current pandemic has also made the concept of digital gold even more popular in the country and has increased digital gold purchasing by almost 70 per cent in the country.

The term 'digital gold' refers to a virtual way of investing in the golden metal. Experts point out that digital gold is considered safer and less expensive than real gold, and it provides easy liquidity, ensuring that one's gold holdings can always be used to create cash during financial difficulties. One may get digital gold in small sachets for a fraction of the price of physical gold, which requires large purchases at a jeweler. People are interested to invest in gold but most concern is about purity of the gold. On the other hand, gold can be bought digitally in the e-wallets or in the form of bonds or via brokers who are offering to buy digital gold.

Primarily, there are three main companies that are offering digital gold in India- Augmont Gold Ltd, MMTC-PAMP India and Digital Gold India. Applications such as Paytm and PhonePe are providing a platform for investing in digital gold. “The way gold is purchased and sold today has been transformed by digital gold. Previously, purchasing gold was limited to festivals and other special events but, with digital gold, one can purchase gold at any time and from any location. There are manifold benefits of investing in digital gold—such as it is cheaper, easy to store, is highly secured and has more liquidity. The way is very simple: Select your platform – apps, select your amounts – purchase your gold – and store gold in a secured locker – sell whenever you want to sell,” said Kshitij Purohit, lead, international and commodities, CapitalVia Global Research Limited.

Of late, companies that offer digital gold service are seeing increased traction and are on a mission to clear many misconceptions that surround digital gold. “There are few misconceptions surrounding digital gold like online gold is not pure, there is an extra hidden cost, extensive documentation is required etc. But all these are false as digital gold is 24K Hallmarked Gold and one doesn't need any documents for purchasing it. All one needs is a smartphone, Internet, bank account details and our app. Our gold prices are inclusive of duty and GST and the users do not have to pay extra for storage charges. All digital gold is stored safely in high-security vaults free of cost with 100 per cent insurance,” said Renisha Chainani, head of research, Augmont.

Chainani added that since the digital platforms offer real time gold rates, the investor can take advantage of the price movements. “One can exchange digital gold for physical jewellery or gold coins and bullion or cash at the time of redemption with doorstep delivery. Digital gold can be gifted too. So, it is becoming popular in the festival season, as Indians have an old tradition of gifting gold in festivals.”

Experts point out that despite the uncertainty in the market, buying gold in India is always considered a symbol of prosperity because it is a safe haven asset that always protects against any adverse geopolitical conditions or natural calamities. “In last three years, it has given a return of more than 50 per cent. Buying gold on a digital platform is a big positive change for the modern world. Gold coins and bars have been India's most trusted investment instruments across the generation. Traditionally, gold buyers had a big problem storing it because of the threat of accidental loss, theft, and decreased resale value due to making changes. Keeping physical gold increases the cost like bank locker charges. Storage charges on digital platforms are very low as compared to physical storage charges. Digital platforms also provide gurantee of purity,” said Abhishek Chauhan, head commodities and currency, Swastika Investmart Ltd.

Commodity experts also point out that digital gold has also found a lot of interest among women in India. “Gold has been an investment instrument of choice for women in India. We have seen women taking to electronic forms of gold with ease. On our platform we have seen women actively invest in SGB (Sovereign Gold Bond) as well as gold savings funds. We see more investment in SGBs than Gold Savings Fund which could be attributed to the instrument being backed by the government and is perceived as a trustworthy option to invest in gold,” said Priti Rathi Gupta, founder, LXME, which is India’s first financial platform for women, backed by the AnandRathi group.

Experts also point out that due to the pandemic, many people might not be able to be with their families to celebrate and exchange presents and that is further giving rise to digital gold. “Digital gold can be gifted to family members across the country, conveniently through a mobile app, ensuring the festive spirit stays alive even from miles away. Millennials, who largely prefer digital alternatives, can also invest in digital gold as a safe haven during the crisis and begin their journey of wealth creation during the auspicious festivals,” said Ashraf Rizvi, founder-CEO, Gilded. Interestingly, this company stores the physical gold in fully insured non-bank Brink’s vaults in Zurich, Switzerland.

Companies such as PhonePe have partnered with SafeGold and MMTC-PAMP for digital gold services. A PhonePe spokesperson said that its digital gold customers belong to various income segments ranging from those who save and accumulate gold by buying small amounts, to those with large purchases worth Rs 1 lakh per month. “Customers continue to buy and build their gold portfolio or savings to meet their financial goals and can sell it anytime and get their money deposited in their bank account. They can request delivery and get gold coins and bars delivered right at their doorstep,” said the PhonePe spokesperson. 


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