The onset of the festive season in India has been traditionally synonymous with gold buying for a long time now. In recent years, however, particularly after the pandemic broke out, there has been a steady shift coupled with an increasing preference towards digital gold as an asset class for investment purposes. This is because digital gold is one of the simplest and safest ways to bolster one’s investment portfolio while hedging against volatile markets.
When it comes to gold ETFs (exchange-traded funds), you can redeem them only in terms of cash and not physical gold as they are gold contracts and derivatives. Therefore, in case you want to convert your gold investments into physical gold for the festive season, there is no option for that with either ETFs or Sovereign Gold Bonds (SGB). Besides locking an investor’s liquidity, SGB requires a minimum investment of 1 gram, with a 5 to 8-year lock-in period. With digital gold, you can start for as low as Rs 1 per day and scale up, or exit, whenever you wish.
Also, with the direct purchase of physical gold, storage over long periods is an issue-- as you run the risk of theft, accidental loss and storage charges when kept in a bank locker.
All-round advantages
The responsibility of storing digital gold in secure vaults and insuring the same on the buyer’s behalf vests with the seller. For the first five years, buyers don’t need to pay any storage fees for this gold. Moreover, zero-making charges offer an immediate advantage over physical gold coins and jewellery purchased solely for investment. In digital gold, you have to pay making charges only when you redeem your investment for a gold coin or bar.
With millennials also taking to gold investments, this asset class has been witnessing year-round sales. As per market analysts, digital gold sales have shot up by nearly 70 percent in India after the pandemic. Digital gold purchase allows investing in the yellow metal via virtual means. Apart from offering easy liquidity, it is also safer and relatively less expensive than physical gold. In case of exigencies, it’s easier to sell such gold holdings to raise cash as compared to traditional jewellery.
Online platforms/apps such as PhonePe, Paytm and Google Pay facilitate investments in digital gold. Besides, buying digital gold sold by the industry leader MMTC-PAMP from these platforms ensures investors are procuring certified 24-carat gold that is 999.9 pure. In the case of other gold providers, the purity may be lower.
Since MMTC-PAMP owns and operates the country’s largest gold ecosystem, storage, security and (re)sale is never an issue. The company also offers 100 percent buyback on its products at its retail stores. In essence, if a customer comes with a packed MMTC-PAMP gold coin or bar, it is bought back at 100 percent value, no questions asked.
The digital gold purchased online is allocated as physical gold vesting under the direct ownership of the investor, which is stored within certified vaults in highly secure premises that remain fully insured. For the investor, the entire process is seamless and hassle-free. Since there is no limit on the quantum of investment, one can begin with sums as low as Re1, going up to Rs 200,000 per day, done in one or multiple transactions.
Redemption avenues
What’s more, the price of MMTC-PAMP digital gold remains unaffected by local factors and is linked to live international markets that are available 24x7 across 365 days. Therefore, irrespective of current market conditions, the investors receive a fair price on the investment as and when they opt to sell. The encashment can be executed through a direct bank transfer.
On the other hand, if investors prefer to redeem their MMTC-PAMP digital gold with physical gold, bars or coins of 24-carat, 999.9 purity will be delivered at their doorstep. On redemption, however, nominal making and delivery charges are applicable for investors. The minimum gold quantity that can be redeemed by the company’s investors is 0.5 gram.
There is no doubt that digital gold has transformed the way people invest in the yellow metal. Previously, the purchase of gold was typically restricted to the festive season or special events in people’s lives. But digital gold ensures that the precious metal can be bought at any time from anywhere without worrying about the hassles of storage and security.
Additionally, in times of uncertainty and volatility such as the pandemic, digital gold acts as a safe haven because it is impervious to natural disasters, geopolitical upheavals or trade wars. As a result, despite economic headwinds in the past few years, gold has offered robust returns to investors.
Considering the continuing uncertainty in global markets, building a portfolio of digital gold can serve as a safe hedge for emergency requirements on a rainy day or during unforeseen events.
(Anika Agarwal is President, Consumer Business – MMTC-PAMP)
