So why are people marching to a gold that doesn’t glitter? Niyati Thaker and Sayali Rai, co-founders of Fincocktail, a personal finance company, say it’s convenience. “Young investors don’t fancy ornaments and view gold only as a smart investment option,” says Thaker. “The variations of digital gold make it convenient and accessible.” “Also,” adds Rai, “since most other types of investment are online, why go through the bother of safekeeping physical gold. Rarely would a Gen Z or millennial [investor] have a bank locker.”

Aniruddh Naik, branding and marketing professional

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Digital Gold comes in the form of Sovereign Government Bonds (SGBs)—bonds issued by the government against the gold they hold; Exchange Traded Fund (ETFs)—stock-like purchases made on trading accounts against gold stored by respective companies; and finally, apps that allow fractional ownership, where one can buy gold for as little as one rupee. Overall, it’s the lack or lowering of risk that makes the option shine. “There are no risks involved as the reserve bodies that hold the gold are not likely to go bankrupt,” says financial advisor Anand Valia, “Trading digitally is only a different method of investing in the same market.”

However, the Securities and Exchange board of India under the SEBI Act 1992, Section 12 (1), does not regulate digital gold with fractional ownerships. Physical holding of gold against digital transactions may be difficult to verify. In case of frauds, it is unclear where complaints can be registered.

Nischay AG, co-founder of Jar, an app backed by SafeGold, one of the three major companies of digital gold, facilitating ownership investment, says, “Indians are currently welcoming the idea of owning gold as an asset, without actually being its custodian and fractional ownership is an important factor for this.” Valia advises to ensure applications are checked.

Sayali  Rai, Niyati  Thaker, Ankur  Jhaveri and Anand Valia

Other entities that provide this facility are Augmont, MMTC PAMP  and SafeGold. Digital payment apps such as Paytm, PhonePe, Amazon Pay have tied up with them. Prominent jewellers namely  Tanishq, Caratlane, Kalyan jewellers, PCJ and more also provide similar services.

According to the Axis report, 11 per cent of investors from ages 18 to 60 years invest in digital gold, but only 35 per cent recognise it. The yellow metal in its digital mould is still catching on among the older lot that traditionally invests more. The Axis report revealed that only 11 per cent of those aged between 45 and 54 buy paper gold, the number drops to 8 per cent in the age group of 55 to 60.

Ankur Jhaveri, co-founder of tax saving and money management portal Jackfruit, says digital gold is still a niche investment. “Older investors avoid it due to tech illiteracy or the mindset that one has to hold it, to own it,” he says. Thaker agrees: “My friends and family invest in gold bonds, but my mom still prefers jewellery. I diversify my portfolio between physical and digital forms.”

“All their life,” says Aniruddh Naik, a branding and marketing professional, “my parents invested in gold through the informal ‘bhishi’ system with the jeweller, where you invest say R1,000 every month for 11 months, and the jeweller adds R1,000 as interest, and you use the compounded amount to purchase gold. Because of them, I started buying gold in the early stages of my investment journey from a well-known jeweller, but I noticed they would insist on us buying a piece of jewellery rather than a coin or bar. That obviously would eat into the savings, as making charges can range between 3 per cent and 25 per cent of the entire amount.”

The Thane resident invested in ornaments for two years before switching. “Later I invested in ETFs and bonds,” says Naik. “Even though it is given against gold, it was unclear if the growth in interest was against actual gold price. Then, about one-and-a-half years ago, I came across a plan where I could invest in digital gold, liquidate it to buy an ornament and have it delivered to my place.” During  last Diwali, he liquidated some of his digital portfolio this way. 

This best-of-both-worlds appeal finds favour with Thaker, too. “My brother,” she says, “who was out of town during Raksha Bandhan, gifted me e-gold through an app. It is an interesting way to add gold to the investment portfolio.” However, the apps now charge a high delivery, which to Naik is akin to making charges. “It’s a huge con,” he says. To use apps such as Jar one has to simply create an account and link bank accounts. The auto pay option can be set to an amount, which is deducted on a particular day. 

Digi gold is sensitive to variations in economic strengths. “People who can’t make a lump sum investment can accumulate gold over a period of time,” says Nischay. It also assures purity and flattens any volatility while buying and selling, since one is technically buying the purest form 24K, and is assured of it. “It saves the hassle of bargaining or worrying about not getting the same value in return as the price [of 24K gold] is the same across vendors,” says Nischay.