Gold is an integral part of Indian culture whether it comes to the celebration of festivals or arrangement of wedding plans. Gold is recognized as the symbol of good fortune and prosperity. As of 2022, around 53 per cent of Indians have been observed to give first preference for the investment in gold. However, over time, with the advancement in technological infrastructure, the investment strategies have changed in terms of shifting towards the purchase of digital gold in India rather than physical gold.
In the last ten years, the price of gold has increased by around 125 per cent, which is expected to be more increased in the coming years, which makes the decision to invest in gold most feasible in the current situation. In this regard, there is flexibility in purchasing gold in the digital form in the elimination of potential risks such as impurity, theft, or storage problems related to physical gold.
Best platforms for investment in digital gold in India
With the increasing preference to buy gold in the digital form, the number of platforms offering digital investment has considerably increased in India. PayTM, Google Pay, PhonePe, SafeGold, and MobiKwik have emerged as prominent players to enable investors to purchase gold through mobile applications. These platforms are well known for offering a safe and secure gold locker with the flexibility to buy and sell gold anytime. From these platforms, starting from as little as Rs 1, the journey for investment in digital gold in India can be started.
However, in order to purchase gold as a stock or bond, one needs to first open a Demat account using a bank account and a Permanent Account Number (PAN) card. For this purpose also, several platforms are available in India, among which Angel One, Zerodha, 5Paisa, ICICI Direct, and Groww are some popular ones.
Best ways to invest in digital gold
Gold ETFs
Gold Exchange Traded Funds (ETFs) are regarded as one of the effective and simple methods for making investments in digital gold. This refers to the commodity fund and based on the price of physical gold, this can be traded on the stock exchange. Therefore, investors can buy or sell gold ETFs as stock during market hours, for which one has to visit online trading applications. Holding a share of an ETF offers the opportunity to be an owner of a small portion of gold bars kept in secured and certified vaults. Prominent examples of gold ETFs in India are HDFC Gold ETF, Axis Gold ETF, Reliance Gold ETF, UTI Gold ETF, Birla Sun Life ETF and many others.
Gold Mutual Funds
Through buying shares in mutual funds, gold can be added to the investment portfolio by the investors. In this process, the investment is allocated to the units of Gold ETFs. Investors need to pay a certain charge for these mutual funds which is referred to as expense ratio, which is charged for the management of the fund or purchasing the underlying assets. Among the well-recognised gold mutual funds, SBI Gold, Kotak Gold, IDBI Gold Fund, Invesco India Gold Fund, DSP World Gold Fund, Quantum Gold Savings, and Nippon India Gold Savings Fund are some prominent ones in India.
Sovereign Gold Bonds (SGBs)
SGBs refer to the securities of the government of India, which are offered through the Reserve Bank of India. Here, one unit of the bond refers to one gram of gold. An individual is allowed to purchase one gram to a maximum of four kilograms of gold through these bonds. One can also obtain the benefit of 2.5 per cent fixed interest per year on the initial invested amount on SGBs. The government of India has started to offer this bond since 2015.
Digital Gold Wallet
Several payment applications like Google Pay, Paytm, and PhonePe introduce the digital gold wallet to facilitate buyers to purchase gold from several authorised providers. There is a secure gold locker in these applications to store the purchased gold. The payment platforms are used to store the gold within the secured locker of MMTC-PAMP. Through the gold wallet, from Rs 1, gold can be purchased in digital form.
Comparison between digital form of gold and physical gold
The foremost benefit related to the digital form of gold over physical gold is the investment cost. There is no requirement of paying making charges in digital form of gold while in the context of physical gold, makers are found to be charging a nominal cost ranging from 5 to 10 per cent.
The second aspect based on which the advantages of gold in digital form can be explained is liquidity. It is extremely liquid and can be sold or bought in real time through the available digital portals. On the other hand, purchasing or selling physical gold is time-consuming.
One can get access to 99.99 or 99.5 per cent of the purity of gold through buying in the digital form, while it is not guaranteed in the aspect of physical gold. The quality of physical gold can vary from jeweller to jeweller as well as city to city.
Purchasing gold in the digital form is strictly regulated which involves required documentation ensuring higher transparency. In physical gold, the certificate of authenticity is offered by a few brands. Moreover, there is a possibility of theft of physical gold which can be eliminated in digital form of gold as it is highly regulated.
Risks to be considered before the investment in digital gold
The price of gold is subjected to considerable fluctuations in a quite short period which depends on several factors such as geopolitical events as well as economic circumstances. Therefore, there is the potential risk of facing losses in the short term. Moreover, as one has to depend on intermediaries like mobile applications or online platforms for the investment in digital gold, therefore, the risk is also connected with the security and authenticity of these platforms. One should always choose the popular and leading platforms which provide robust security measurements to avoid the potential security risk in the investment.
FAQ
1. Why is a digital form of gold preferred over physical gold in India?
Digital form of gold is preferred over physical gold because it eliminates risks such as theft, storage issues, and impurities. Additionally, the digital form of gold enables investments starting as low as Rs 1, making it accessible to a wider audience.
2. What are the best platforms to invest in digital gold in India?
Prominent platforms for investing in gold in digital form in India include PayTM, Google Pay, PhonePe, SafeGold, and MobiKwik. For those interested in gold ETFs or mutual funds, platforms like Angel One, Zerodha, and Groww are recommended for opening a Demat account.
3. What are the different ways to invest in digital gold?
Investors can choose from several methods to invest in digital gold. These include Gold ETFs, which are traded on stock exchanges based on the price of physical gold, and Gold Mutual Funds, which invest in Gold ETFs and charge an expense ratio. Sovereign Gold Bonds (SGBs) are another option, offering a fixed interest of 2.5% per year. Digital Gold Wallets, available through payment apps, allow users to purchase gold from authorised providers and store it securely.
4. How do the investment cost and liquidity compare between the digital form of gold and physical gold?
The digital form of gold typically has lower investment costs since there are no making charges, while physical gold incurs charges ranging from 5% to 10%. Additionally, the digital form of gold is highly liquid, allowing for real-time buying and selling, whereas transactions involving physical gold can be more time-consuming.
5. What risks should investors consider before investing in the digital form of gold?
Investors should be aware of potential price fluctuations in gold, influenced by geopolitical events and economic conditions. Reliance on intermediaries and online platforms also carries security risks. It is important to select reputable platforms with strong security measures to ensure the authenticity of investments.
