Sanjay Malik, a 28-year-old analytics professional based in Noida, wanted to invest ₹40,000 in gold in November 2021. After deliberating over it for a few days with his wife, he finally decided to invest the money in digital gold instead of buying it in its physical form. He is not alone. There is a growing demand for digital gold, especially among young investors.
During the pandemic period in 2020-21, a paradigm shift was seen towards digital gold from the physical form. PhonePe, which was the most popular platform for buying digital gold, witnessed a six times increase in the volume of gold sold during the Diwali season in 2020.
After stock market prices fell sharply in the wake of the pandemic, gold emerged as a safe-haven investment, as seen by a jump of 28 percent in its prices in 2020.
READ MORE: Is digital gold worth the investment?
What is digital gold?
It is gold in digital form which you can buy without going to a jewellery store. You can buy and sell small units of gold -- less than one gram, offering you convenience and flexibility.
You can buy digital gold through UPI or money wallet such as PayTM and Google Pay. You can buy digital gold on MMTC-PAMP, Augmont Goldtech, Oropocket and Digital Gold India (SafeGold), among other platforms.
READ MORE: Which is a better investment: Gold mutual funds or gold ETFs?
Why should you buy digital gold?
Buying digital gold is as easy as shopping online with no requirement of a Demat account, whereas investing in the other form of Gold — ETFs — requires a Demat account. Those looking for short-term gains can invest in Gold ETFs as you can easily liquidate your capital but if you are investing for a long-term, one can consider Sovereign Gold Bonds (SGBs) as they offer an assured return of 2.5 percent per annum.
However, to buy digital gold, one has to only pay three percent GST and it can be easily liquidated. Digital gold is also more accessible and cheaper than gold ETFs or gold bonds.
READ MORE: Consider buying gold bonds through banks and demat accounts to contain inflation impact
Using blockchain for digital gold
When it comes to buying gold digitally, there is a concern amongst investors whether the process is safe and secure. Oropocket uses blockchain technology to give users the assurance of secured investment.
“We enable users to invest in digital gold and silver as a safe hedge against inflation and utilize these investments for day-to-day expenses. As every transaction is recorded on the blockchain, there is absolute transparency in terms of taxation. Blockchain has garnered ample interest from the younger generation and this has been observed in our user base too as the majority of our users are ‘millennials’,” says Miss Mittal.
Can you buy digital gold via SIP?
Although it’s not a popular option as of now, there are a few fintech platforms which give an option of investing in digital gold via SIPs.
From a new investor’s perspective, it is quite convenient to start Gold SIP (systematic investment plan) wherein you deposit a fixed amount every month instead of paying in lumpsum. “One can start investing in digital gold with as low as ₹100 with no lock-in period. One can also use the digital gold as cash with our UPI feature,” says Tarusha Mittal, COO and Co-founder of Oropocket, a fintech company that allows investors to buy digital gold in SIPs.
As we summarise, we can underscore the fact that digital way of investing in gold is lucrative for those who want to diversify their portfolio and stay invested in gold in the long-term.