Digital gold is a virtual way of investing in gold without having to visit the store physically. While purchasing digital gold the transaction is done smoothly with no hassle of storing it like physical gold.
While fintech companies allow investors to buy digital gold for an investment amount as low as INR 1 ($0.013), banks and brokerage houses enable you to invest in the lowest possible denomination of INR 1,000 ($13.31) and further in multiples of INR 100 ($1.33). All investors need is to have access to the internet and mobile banking and they can invest any time anywhere.
Features of Buying Digital Gold
Authorized Dealers
Digital gold providers help you purchase gold through electronic payments and they hold your gold in the physical form at a secured vault on your behalf. It could be a payment wallet or a scheduled commercial bank, entities regulated by the Reserve Bank of India (RBI).
Vaulting Location of Gold
It involves buying digital gold from service providers who hold your gold on your behalf in an overseas location. You buy gold in Indian rupees, the service provider simultaneously buys it in overseas locations on your behalf in dollars.
Stamp of Trust
The seller of digital gold should ideally have an independent Securities and Exchange Board of India (SEBI) registered trustee who audits and confirms the gold holding each month.
Pricing
The pricing varies among digital gold providers as it would depend whether the price is based on 995, 999 or 9999 carat purity.
Buy-Sell Price
Buying digital gold is similar to buying gold in a jewelry store, wherein a price is often displayed on boards – a price to buy and another to sell.
Fungibility And Delivery Of The Gold
Digital gold can be redeemed 24/7. Some providers also offer to exchange it for jewelry at a store. However, the information on the minimum grammage of delivery on redeeming your investment and the cost related to conversion are details should be made available to you in advance.
Benefits Of Digital Gold
Purity
Digital gold is traded in 24-carat form only, the highest purity for the metal.
Safety
The digital form of gold is kept in a demat account making it less prone to any form of theft.
No Locker or Insurance Charges
Storing gold in a demat account is also fairly cheaper than storing physical gold that invites locker charges as well as insurance cost for using a safe or a vault.
Liquidity
Digital gold can be bought and sold in a fraction of a second, anytime and anywhere with the convenience of digital access to the commodity.
No Wear and Tear
Digital gold is secure in a digital format and does not undergo any wear and tear.
Government-Backed and Transparent
The government offers a sovereign guarantee on sovereign gold bonds and are risk-free or with minimum risk of a default.
Added Benefit Compared With Bonds
Gold bonds have more benefits as compared to other bonds, wherein the interest along with the gold rate appreciation can be enjoyed.
Where Can You Buy Digital Gold In India?
Among the popular vendors assisting investors in buying digital gold is MMTC-PAMP India Private Limited, which counts fintech companies such as Paytm, PhonePe, and banks such as HDFC Bank and ICICI Bank, as well as brokerage houses like Motilal Oswal and Angel Broking among its intermediaries who assist the sale and purchase of digital gold.
Digital gold can also be traded via India’s securities provider, the Stock Holding Corporation of India, which helps investors purchase gold via a programme called GoldRush. GoldRush enables you to create an online account where funds can be added to to accumulate gold for as low as INR 100. Customers can withdraw gold at their convenience.
Buying Gold Through Payment Platforms
Investors can purchase gold from payment platforms like Google Pay, Paytm and PhonePe. If you are an active end user of the following platforms it is easier to purchase digital gold via them. Google Pay and Paytm have a tie-up with MMTC-PAMP and PhonePe has a tie-up with both MMTC-PAMP and SafeGold. You can buy and sell digital gold through them.
- Investors need to download the said payment applications and then select the “Digital Gold” or “Gold” option from the app.
- Now, you have to enter the desired purchase amount and grams.
- Make the payment via a Unified Payments Interface (UPI), debit card or mobile wallet.
- Once everything is verified and payment is done successfully the digital gold is added to the applicant’s digital gold account.
Risks Related To Digital Gold
Buying gold digitally also carries risk. The regulatory framework to regulate digital transactions of the metal is not clearly defined in India as yet. Till the time the government frames necessary guidelines to regulate buying and selling of gold in digital forms, it is important for investors to carry out due diligence on the integrity, credibility, reputation, and business model of the digital gold provider to avoid any risk.
Hidden charges are another factor to consider before investing into the instrument. Cross-check any or all charges involved, else they will adversely affect the overall returns from the investment. Buying the digital form of the commodity is also prone to cyber thefts that come along with any online transaction.
Bottom Line
The Indian federal government sheds light on the fact that the SEBI is the market regulator for gold exchanges. This builds trust among retail buyers and gold traders. With SEBI as the regulator, the procedure of buying and selling gold has become smooth and the delivery of the gold products is now three days which is one trading day plus two more days i.e T+2 days.
Investors need to be more financially knowledgeable and open to new products that will help them better their long-term returns on investment.
