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How digital gold is paving its way into portfolios of young investors as they look to hedge uncertainties

Digital gold is still a niche industry in the Indian market and comes with its own set of associated myths including the risks, taxation, and how it differs from other gold investment options like ETFs and gold bonds.

How digital gold is paving its way into portfolios of young investors as they look to hedge uncertainties
While gold has always been considered one of the safest and most lucrative forms of investment instruments in India, the ease of access and small ticket size is making digital gold a popular investment option. (Image: REUTERS)

By Gaurav Mathur

‘Investing isn’t risky; not being in control is risky’ ~ Robert Kiyosaki. This is the investment DNA of the young millennial and Gen-Z generation. Over the years, the perception of investments has moved from being a ‘to-do tax-saving activity’ to ‘a step towards building a secured future’. According to a survey, 84% of millennials have stepped up their wealth management strategy to be prepared for future contingencies. Technology has played a major role in driving this behaviour and increasing investment in digital gold makes a great case study. 

While gold has always been considered one of the safest and most lucrative forms of investment instruments in India, the ease of access and small ticket size is making digital gold a popular investment option. With stable long-term gains, and no upper limit on purchases, it is proving to be a great diversification investment option. In a market like India where approximately 800 tonnes of gold is consumed in a year (WGC 2021), digital gold presents great opportunities for its investors.

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Having said that, digital gold is still a niche industry in the Indian market and comes with its own set of associated myths including the risks, taxation, and how it differs from other gold investment options like ETFs and gold bonds. Understanding the functionality, approachability, and efficiency of digital gold in depth will help you make an informed decision:

A more stable option for new-age investors: The global market has seen massive volatility in the recent past with the Covid-19 pandemic, escalating tensions between Russia-Ukraine making investment options like the stock market and cryptocurrency volatile. In fact, the leading cryptocurrency has witnessed high average volatility (77.08% ) in the last 5 years. However, during the same period, the gold market was relatively stable with 13.70% average volatility. Undoubtedly, gold becomes a more stable option to invest in and a part of your portfolio for long-term gains. Coupling it with the benefits like the option of investing smaller amounts, a guarantee of 24K gold purity, easy sale, and purchase makes it a lucrative option for diversification. 

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Physical tangibility at your will: Being backed by actual physical gold, digital gold offers  the investor a unique opportunity to convert it into a tangible form as per one’s ease and convenience. Physical tangibility ensures your investment has a solid backing that can be conveniently carried anywhere along with you. It offers easy possession where anyone can have gold delivered to their doorstep, at any time in a tamper-proof, insured package. An investor can procure physical gold equivalent to the value of digital gold in the form of 24K gold coins, bars. Investment platforms also have jewellery partners where you can exchange your digital gold for jewellery. 

The value of physical with the convenience of digital: While gold bonds have a longer investment period, digital gold and ETFs are more liquid investment options.  Digital gold also retains the age-long use case to be used as collateral for loans. Gold storage is also a trouble for the majority as accumulating large amounts of precious metal in one place increases the risk of theft. With digital gold, your investment is safely stored in a guarded vault regulated by renowned trustees.

(Gaurav Mathur is the Founder and MD SafeGold. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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