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Building up the festive cheer: Right time to invest in gold

The Financial Express logo The Financial Express 27-09-2022 guest
Gold continues to be an integral part of religious and festive ceremonies in India. © Provided by The Financial Express Gold continues to be an integral part of religious and festive ceremonies in India.

By Amul Kumar Saha, Chief Digital Officer, MMTC-PAMP

The festive season is the most awaited time for brands, distributors and consumers as the sales across consumer-focused sectors go up manifold during this time of the year. For Indians, gold in particular, has a deep-rooted cultural significance, especially during pre-Diwali when families buy gold owing to religious and cultural norms.

Gold continues to be an integral part of religious and festive ceremonies in India. It is common for people to purchase gold during occasions like Akshay Tritiya, Navaratri and Dhanteras as it is believed that the precious yellow metal brings fortune and prosperity to the household.

As per a recent report published by the rating agency ICRA, India’s demand for gold jewellery is expected to increase a healthy 11 per cent during the festive season this year. Thanks to the fast-paced vaccination program, aware citizens and low transmission rates, the festive season this year brings a lot of hope and cheer for the gold sellers. The Reserve Bank of India (RBI) has also predicted a bountiful festive season for the sellers with a boost in consumer demand in metros as well as the Indian heartland.

Should you currently invest in gold?

When gold prices are lower than marked highs, the case for investing in gold gets stronger, and so does the sentiment around the yellow metal. At present, the fluctuations in the pricing indicates that it is advisable to invest in gold with a long-term view. Even though gold prices are not isolated from volatility, one should keep investing gold in smaller amounts in forms of ingots, bars, coins or digital gold, rather than attempting to time the market.

After capturing this opportunity to buy gold, one shouldn’t worry about portfolio diversification as the yellow metal adds stability to their investments. As a thumb rule, investors are advised to allocate 10-15% of the total portfolio in gold, and retail investors continue to experiment with new, yet trusted formats like digital gold and sovereign gold bonds.

Known to be a virtual method of buying and investing in yellow metal, digital gold can be bought online with a minimum buy or sell value of as low as one rupee. It has been gaining a lot of popularity lately, especially among younger investors, as there is no storage cost involved. Providers like MMTC-PAMP back every paisa of digital gold purchased by the customer with an equivalent amount of physical gold in their bank-grade insured and secured vaults. This physical gold is further audited by a third-party Trustee. People buying physical gold often struggle with the safekeeping and storage of precious yellow metal, and end up paying steep locker charges for securely storing the gold. This consumer pain-point is alleviated when they invest in digital gold. It is critical for the consumers to invest with a trusted digital gold provider.

While there is a strong sentimental value associated with the purchase of physical gold during the festive season, investing in digital gold comes with its own set of benefits. To begin with, Digital Gold allows flexibility for the investors to take physical delivery of gold at their doorsteps whenever required. Plus, it is highly liquid as the digital form of gold can be sold at the prevailing retail market rate at any point in time. Investors can easily buy or sell units anytime and anywhere.

Busting the myths around Digital Gold

Given that Digital Gold is still a new concept in India, there are several myths that tend to bother investors, but its accessibility and feasibility in comparison to physical gold is way easier.

Myth 1: Digital Gold is expensive

The best part of investing in Digital Gold is that the consumer can invest in it for as low as 1 rupee. It is not only cost-effective but also budget-friendly as there are zero making charges when one buys digital gold.

Myth 2: It is notional

Since it is bought digitally many people assume that it is notional gold holding. On the contrary, one can easily redeem Digital Gold for Physical gold coins/ bars whenever required and get a secure doorstep delivery. The consumer can also at any given point in time sell the gold holding back to the digital gold provider.

Myth 3: Requires extensive documentation

Well! It is one of the most convenient and hassle-free methods to buy gold. One either needs to install an app or register online to start investing. No documentation is required, and one just needs to have a bank account or UPI. However, if one is investing beyond INR 2 Lakhs, his/her PAN card details will be required.

Myth 4: It’s risky to invest in Digital Gold

Providers like MMTC-PAMP back every paisa of digital gold purchased by the customer with an equivalent amount of physical gold in their bank-grade insured and secured vaults. This physical gold is further audited by a third-party Trustee. People buying physical gold often struggle with the safekeeping and storage of precious yellow metal, and end up paying steep locker charges for securely storing the gold.

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