Why Investing In Digital Gold Is A Secure Gifting Option This Wedding Season

Digital gold is the virtual investment of gold with pure gold as its underlying asset and translates into holding gold virtually. It is a secure online investment, where investors can buy 24K, 999.9 certified gold and whenever it is purchased online, MMTC-PAMP stores an equal amount of physical gold in its secure vault. Digital gold can be purchased for as low as Re1/- and investors have the choice of retaining the purchase within MMTC-PAMP’s secure digital vault or redeeming it later from an extensive range of gold coins and bars that are 24K 999.9 pure. If the investor opts for the physical option, this is delivered to his/her doorstep directly.   

A dynamic investment instrument that is completely liquid, a person can buy/sell the gold at any time without levying any transaction or exit charges and unlike gold jewellery, digital gold doesn’t incur making charges. Whenever required, investors could liquidate their investments 24x7 with a single click going by real-time rates.  

To provide more clarity on digital gold and the trends that will encapsulate the emerging market, MMTC-PAMP’s Managing Director and CEO Vikas Singh spoke to BW Applause & Everything Experiential.

How do you assure your customers of the genuineness of digital gold? For example, how do customers ensure that their digital gold is actually backed by gold (of a certain purity) stored in vaults?

Each grain of digital gold purchased by customers is kept in secure and insured bank-grade vaults kept in MMTC-PAMP’s own refinery, which is secured by all possible process and security measures and is also insured for force majeure ensuring absolute safety for the customer’s investment. After every day, our books are reconciled based on the day’s transaction volume and gold is moved to respective partner vaults as per the additional purchases of the day. This gold is stored in the form of 24k, 999.9 purest grains and when redemption or sell request from the customers is received, the balance amount is moved out of the vault.

At all points the ownership of accumulated gold lies with the customer and the responsibility to secure their gold in physical form is with MMTC-PAMP. We have also appointed ‘Universal Trusteeship Services Ltd.(UTSL)’ (unit of Universal Trusteeship Services Ltd.(UTSL) Bank) as security trustee for the gold bought by the customers. The trustee ensures the quality of the gold and that the gold sold to investors is segregated and available in the vaults. It is a rigorous process, with multiple checkpoints and audits to ensure the customer’s investment remains safe.

Additionally, we are India’s only refinery accredited by both, London Bullion Market Association (LBMA) and BIS. All digital gold investments are backed by 24K, 999.9 gold, and the customers can redeem their gold from MMTC-PAMP’s wide range of 24K, 999.9 purity gold bars and coins for secure and convenient home delivery. Every single one of MMTC-PAMP gold coins and bars is authenticated by a BIS-certified assayer, ensuring that the customers only receive the best-in-class product.

Please explain all taxation-related aspects of digital gold from the buyer’s perspective.

There is a 3% GST levy on all gold transactions, including digital gold. The benefit of digital gold is that there are no making charges when you buy MMTC-PAMP digital gold, whereas in jewelry making charges can go as high as 20%.

Many jewelers provide the option of buying digital gold. What is the advantage of buying digital gold from MMTC-PAMP compared to from reputed jewelers?

MMTC-PAMP is a joint venture between MMTC Ltd, a Govt of India Undertaking, and PAMP S.A. of Switzerland, the world’s most accredited precious metals refinery boasting nearly a half-century of global leadership. The fact that millions of customers are investing in MMTC-PAMP digital gold stands a testament to our efforts toward ensuring the highest standards in quality, purity, corporate ethics, and other aspects of our operations. It also underlines the faith our customers have in our products and their recognition of the brand's relentless focus on customer centricity.

How do you arrive at the pricing for digital gold? At any particular time, is the price at which digital gold can be bought and sold, the same?

The pricing is dynamic and is at real-time market rates. MMTC-PAMP’s digital gold rates are linked directly to international markets and are not influenced by local markets or geo-political reasons. 

The customers do not incur any making charges when they buy digital gold. As with most financial investments, in gold too true value is realised over a medium to long term, hence looking at gold’s buy/sell rate in a small window goes against conventional market wisdom.

Digital gold bought by a customer can either be sold back to MMTC-PAMP for cash or be home-delivered in the form of gold coins/bars or transferred to someone. Is that correct? Is there a minimum / maximum limit on this?

Yes, a customer has multiple options to exit his digital gold investment. The customer can sell his digital gold back to MMTC-PAMP and get money via direct bank transfer in real-time. The customer also has an option to redeem his digital gold for MMTC-PAMP’s exquisitely crafted 24K, 999.9 purest gold coins and bars. The minimum digital gold balance required for raising a redemption request is 0.5g and it can go up to 100g per redemption request. If a customer’s digital gold balance is more than 100g, they can simultaneously raise multiple redemption requests.

Based on your website, a customer can buy and store your gold for 5 years (and after that, for a charge) from the date of purchase. This makes digital gold inconvenient for a long-term gold investor. Your comment on this.

As with most financial investments, in gold too true value is realised over a medium to long term. The market volatility matters and definitely impacts the sentiments of the buyers as they use the data to align their portfolios and formulate exit strategies. Investors looking to store their digital gold beyond 5 years will have to pay very nominal charges, and it will definitely be more cost-effective when compared to the annual charges incurred for renting bank lockers, where people traditionally store their gold.

Will the electronic gold receipts expected to be launched this year, pose competition to digital gold?

We appreciate the government's initiatives like Electronic Gold Receipt and the proposed Gold Exchange that will create a national pricing structure for gold and pave the way for the operationalisation of a gold exchange in India.