Digital Yellow Metal
December 2, 2021Gold! Since time immemorial human being has always been fascinated by the shining yellow metal. Many wars have been fought to acquire the same and many nations were plundered. We, as Indians, always have an unquenchable fascination for this yellow metal. There is seldom an occasion for us without gold. As the age advances, gold has taken many a shape from huge bars to coins to even nuggets. In this digital age, even gold has undergone a digital transformation. We have heard about many instruments like Sovereign Gold Bonds, Gold Mutual Funds and Gold ETFs to invest in. The latest to join the bandwagon is Digital Gold.
Digital Gold is a virtual way of investing in gold without actually holding the metal physically. When a person is looking at gold as a pure investment instrument; there is no use in getting procuring it physically. There is always a concern about storage and safekeeping. In such cases, digital gold can be useful wherein the same is bought online by the buyers and the sellers usually store the gold in insured vaults. The buyer can invest as small an amount as one rupee. The purity of gold is also certified by government licensed agencies. The physical gold can be exchanged as jewellery, coins or bullions when required and also take delivery at their own doorsteps as well. There are provisions wherein we can use digital gold as collateral for online loans.
There are three major companies in India that are providing digital gold – MMTC-PAMP India, Augmont Gold Ltd and Digital Gold India. Even applications like PhonePe and Paytm also are offering platforms for the same. Having said these, there are downfalls as well while investing in digital gold. There is no regulatory body for digital gold like SEBI and RBI. So, there is always an element of concern as there is no one to govern or regulate this. And if a risk arises for any customer, there is no one he/she can turn to for recourse. In October 2021, the Securities and Exchange Board of India (SEBI) had advised the investment advisors to refrain from selling digital gold to customers. However, online platforms continue to do so. Moreover, there is a reasonable doubt if the physical gold is actually being stored in a vault and that is where the fear of the investor lies. There is an upper limit of Rupees Two Lakhs for the investment. Some of the companies offering the storage services have a limited storage period and when the delivery happens there can be a charge attached to it with making charges attached to it if the user is to withdraw the physical gold as jewellery.
India has always been one of the leading importers and consumers of the yellow metal. From an investment point of view; Gold can make up a small part of our portfolio. But with a limit of two lakhs and a lack of a regulatory body to govern the instrument; we have better options like Sovereign Gold Bonds and Gold ETFs currently. In the future, if there is a regulatory body in place for digital gold and a change in investment limit; digital gold will seem an appealing investment for people who prefer investing in physical gold.
Thank you. We are glad to have garnered you interest and we would definitely bring in more good reads.