The consumption of gold is expected to increase by 35% from 2015 to 2020 and digital gold has a significant role to play in it.
The structured effort to digitise India by giving a formal push to digital payment systems via the high penetration that smartphones and e-wallets provide has opened up new avenues to invest in gold.
India’s US$34 billion gold market, traditionally driven by small personal interaction through local jewellers, has now reached the fingertips of smartphone users.
Though minuscule compared to physical gold transactions, digital transactions are growing by leaps and bounds. In less than two years, close to seven million customers have traded gold though digital means and the number is expected to significantly rise during the festive season of Diwali – starting with Dhanteras, as it is believed to be an auspicious day to buy gold.
You can now buy, sell, or store gold, with the flexibility of choosing the investment amount, starting with as little as one rupee. This is vaulted and operated by MMTC-PAMP India Pvt Ltd, India’s first and only LBMA Good Delivery refinery accredited institution. It was formed as a joint venture between PAMP SA, a Switzerland-based bullion brand, and MMTC Ltd, a Government of India undertaking.
Digital gold brings with it quite a few benefits that make the yellow metal lucrative to a whole new segment of investors. Here are the main advantages:
Convenience: Applicable both in terms of transaction and storage. You can transact as and when you please without the need to visit a physical store. There is no brokerage or deduction on a trade. The purchase is fully insured and safely stowed away with MMTC-PAMP and incurs no holding cost, eliminating the stress of safekeeping the asset. Whenever required, you can request a physical delivery of your gold.
Value: Through a physical store, the smallest gold unit one can purchase is 1 gm. At the current market value, it can cost in excess of Rs 3000. Which means someone with an affinity for gold will have to save quite a bit to make a substantial purchase. With the digital mode, however, one can buy as little as 0.1 gm. With Gold Accumulation Plans (GAPs), one can make regular systematic investment in gold, just as with mutual funds.
Transparency: The digital medium boosts market transparency by offering live pricing. What you see is what you get. On the other hand, every jeweller you visit may offer the same product to you at different prices, with a variable margin and also add ‘making charges’. Moreover, there is no doubt regarding the purity of gold invested digitally. Each physical delivery comes in tamperproof packaging with a certificate of authenticity that ensures 99.9% purity, adhering to the highest technical and quality requirements anywhere in the world.
The significance that gold has in local customs and weddings will ensure that physical demand for gold remains strong. However, digital gold creates an opportunity for new buyers to get a taste of the precious metal and add to the demand of gold and gold-related products.
Digital platforms such as Paytm, PhonePe, MobiKwik, NiYo, InstantPay, etc. provide easy and convenient access to buy gold via an in-app purchase option. Investment in GAPs can also be made through securities agency Stock Holding Corporation of India.
The consumption of gold is expected to increase by 35% over the period 2015 to 2020, and digital gold has a significant role to play in it.