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Buying gold on auspicious occasions like Akshaya Tritiya is a part of the Indian tradition. According to religious beliefs, buying gold on Akshaya Tritiya brings prosperity and good luck. This year, Akshaya Tritiya will be marked on April 22. People buy all forms of gold ranging jewelry to digital gold. However, with changing times, and digitisation, investors are preferring digital gold.
What is digital gold?
Digital gold is a relatively new way to purchase gold online. It’s an alternative to buying the yellow metal in its physical form. Users can now purchase digital gold where an equivalent amount of that is kept as physical gold in an insured vault. The minimum amount one can buy is as low as one rupee. Customers can choose to sell the entire or a fraction of the gold at any given time at the current market rates. However, it is not regulated by any government body such as SEBI or RBI. The tax treatment on digital gold is the same as that applicable to gold
Reasons to invest in digital gold
According to Ronit Harisingani, Co-Founder, of Spare8, the following reasons should be looked at to invest in the yellow metal in the digital form.
1) Security
For instance, Augmont Goldtech, one of the three Digital Gold providers in India stores the equivalent in Sequel Vaults which is monitored by an independent trustee. Further, the physical Gold stored in the vault is also covered by insurance.
2) Use as collateral
Very few people are aware of the fact that users are able to collateralise their Digital Gold and take loans out of it too. This helps borrowers avoid the tedious process of applying for loans and reduces their chances of rejection.
3) Leasing
Recently, this asset class has helped shift users from a savings to a wealth creation model. With Digital Gold, one can now lease a minimum of 1 gm of Gold and receive interest of up to 14% p.a for the same. The physical gold which was stored in secured vaults is leased to small jewelers, who then pay interest to the customer who was holding it in the digital format.
To conclude, this particular asset class does not only act as a savings mechanism, but can be used to open up the entire financial ecosystem for a customer who is just getting started. They can lease it, get credit out of it, and ask for physical delivery of the same at any given time.
With flexibility, no lock-in period, minimum Investment amount being Re1 and with an annualised CAGR of 12% over the last 5 years, this also does outperforms several other asset classes available in the market today.
