{"id":7549,"date":"2021-11-05T16:00:46","date_gmt":"2021-11-05T16:00:46","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=7549"},"modified":"2023-10-26T05:50:49","modified_gmt":"2023-10-26T05:50:49","slug":"investing-in-gold-digitally-and-its-contribution-to-the-indian-economy","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/investing-in-gold-digitally-and-its-contribution-to-the-indian-economy\/","title":{"rendered":"Investing In Gold Digitally And Its Contribution To The Indian Economy"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7549\" class=\"elementor elementor-7549\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-329b64fa elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"329b64fa\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5d3e9137\" data-id=\"5d3e9137\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1dee56 elementor-widget elementor-widget-text-editor\" data-id=\"1dee56\" data-element_type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The Indian Government&#8217;s efforts towards a digital economy have reshaped the country&#8217;s $34 billion gold market. As smartphones, e-wallets, and several flexible investment schemes emerge as viable <a href=\"https:\/\/www.kredx.com\/Invoice-discounting-investment\">investment platforms<\/a>, India\u2019s gold investors have shifted their preference. Consequently, digital gold investments have gained popularity in recent times.<\/span><\/p><p><span style=\"font-weight: 400;\">Demand and supply share an important relationship with investment. Currently, India stands at the forefront of importing gold. The massive import of gold significantly affects the current account deficit (CAD) as well as the Government&#8217;s policy.<\/span><\/p><p><span style=\"font-weight: 400;\">Nonetheless, before investing in digital gold, investors must know certain aspects of this investment instrument and its impact on the Indian economy. <\/span><i><span style=\"font-weight: 400;\">Let&#8217;s discuss this briefly.<\/span><\/i><\/p><ul><li aria-level=\"1\"><h2><b>Gold Acts As Hedge Against Inflation<\/b><\/h2><\/li><\/ul><p><span style=\"font-weight: 400;\">The basics of hedge assets are to protect one&#8217;s finances from an adverse financial environment. Gold is considered an important hedging instrument owing to several reasons. Hard assets, including natural resources such as gold, silver, real estate, have limited supply hence hold intrinsic value.<\/span><\/p><p><span style=\"font-weight: 400;\">Here, the interest rate is an essential factor in the supply and demand of credit. Gold prices rise when the interest rate declines which is directly related to the health of the economy.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Inflation plays a crucial role in determining interest rate levels. This is because lenders demand higher interest rate charges to compensate for the decrease in the purchasing power of money. Therefore, inflation can decrease the value of rupees and dollars and minimise the purchasing power.<\/span><\/p><p><span style=\"font-weight: 400;\">Therefore, investing in gold, even in digital form, offers protection against inflation in the future. Furthermore, due to the intrinsic value of gold, it can perform well during inflation. Hence, it is clear that\u00a0digital gold investment\u00a0can prove to be an excellent way to protect one&#8217;s hard-earn money against inflation.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><h2><b>Gold Is A Safe Portfolio Diversifier<\/b><\/h2><\/li><\/ul><p><span style=\"font-weight: 400;\">Digital gold investment<\/span><b>\u00a0<\/b><span style=\"font-weight: 400;\">adds diversity to investors&#8217; portfolios and helps them safeguard their money against market uncertainties.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">While investing, investors should not only focus on increasing wealth but also protecting it. Allocating some percentages to digital gold can provide a cushion against volatilities and heightened market risks.\u00a0<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><h2><b>Gold Has Negative Correlation With Stocks, Currencies\u00a0<\/b><\/h2><\/li><\/ul><p><span style=\"font-weight: 400;\">Gold has a negative relation with the stock market, the dollar. Therefore, gold prices move in the opposite direction of the stock market and dollar prices. It means gold prices go up when stock prices go down.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Therefore, when inflation strikes the Indian economy, the yellow metal, even in digital form, can retain its value over other currency-backed assets. As a result, investing in <a href=\"https:\/\/www.kredx.com\/blog\/is-investing-in-gold-a-good-idea\/\">digital gold<\/a> can help one to hedge one&#8217;s investment risk.\u00a0<\/span><\/p><p><i><span style=\"font-weight: 400;\">With such important aspects of\u00a0digital gold investment into consideration<\/span><\/i><b><i>, <\/i><\/b><i><span style=\"font-weight: 400;\">take a look at how it impacts the Indian economy.\u00a0<\/span><\/i><\/p><h3><b>Digital Gold Investment And Its Contribution To The Indian Economy\u00a0<\/b><\/h3><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">As per January 2021 data, India&#8217;s gold and diamond trade contributed to around 7.5% of India&#8217;s GDP (Gross Domestic Production).<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to the World Gold Council, the demand for gold investment has increased (in terms of volume) by 37% YoY to 140 tonnes in Q1 2021.\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Another report shows gold investment demand has increased by 8% YoY to 48.9 tonnes in the Q4 in FY2020.\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">As of April 2021, India exported gems and jewellery of USD3.37 billion and imported the same worth USD2.19 billion.\u00a0<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">The facts and figures mentioned above point to increased gold demand. This demand leads to a boost in imports which makes this yellow metal the second-highest purchased overseas commodity after oil.\u00a0\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">The high gold price (which has doubled in the last 5 years) attracts investors, thus making the gold investment arena stronger. However, this increased gold demand and its import have resulted in a current account deficit (CAD).\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">When buyers purchase gold from foreign dealers in exchange for Indian Rupee, a disruption occurs in the balance of cash inflow and outflow, which further lowers the rupee&#8217;s value. CAD is related to GDP, which can impact the overall economy when it rises.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">However, the Indian Government has brought about some changes in the import duty and introduced some new schemes and policies to salvage this situation and encourage more gold investment.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Investors willing to reap the benefits of gold investment know that the investment can be made in either physical or digital form. However, one can gain numerous benefits by investing in the latter.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Contrary to physical gold, digital gold investment offers benefits like quality assurance, convenience, and many more. Also, one can maximise the benefits by investing in digital gold through online platform.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">A comparative analysis of these two investment mediums will aid investors to gain perspective into the matter:\u00a0\u00a0<\/span><b>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0<\/b><\/p><table><tbody><tr><td><b>Parameter<\/b><\/td><td><b>Physical Gold<\/b><\/td><td><b>Digital Gold<\/b><\/td><\/tr><tr><td><b>Investment size<\/b><\/td><td><span style=\"font-weight: 400;\">Gold coins and bars are available in the denominations of 10 gm.<\/span><\/td><td><span style=\"font-weight: 400;\">Digital gold can be bought and sold by weight or fixed worth.\u00a0\u00a0<\/span><\/td><\/tr><tr><td><b>Price<\/b><\/td><td><span style=\"font-weight: 400;\">Physical gold prices are not uniform.\u00a0<\/span><\/td><td><span style=\"font-weight: 400;\">Digital gold prices are uniform throughout the country.<\/span><\/td><\/tr><tr><td><b>Storage<\/b><\/td><td><span style=\"font-weight: 400;\">Physical gold is stored either at home or locker and hence are exposed to risks of theft.<\/span><\/td><td><span style=\"font-weight: 400;\">Digital gold exists only in paper form.<\/span><\/td><\/tr><tr><td><b>Cost<\/b><\/td><td><span style=\"font-weight: 400;\">Making charges of 20%-30% are levied on physical gold.\u00a0<\/span><\/td><td><span style=\"font-weight: 400;\">3% GST is levied on digital gold.<\/span><\/td><\/tr><tr><td><b>Liquidity<\/b><\/td><td><span style=\"font-weight: 400;\">Physical gold can be exchanged through a jeweller.<\/span><\/td><td><span style=\"font-weight: 400;\">Digital gold is redeemed through bullion, cash, and coins easily.\u00a0<\/span><\/td><\/tr><tr><td><b>Taxation<\/b><\/td><td><span style=\"font-weight: 400;\">Gains from less than 3 years of investment are taxed as per one&#8217;s income tax slabs. On the other hand, profits from the investment that are held for more than 3 years are taxed at 20% with indexation benefit.<\/span><\/td><td><span style=\"font-weight: 400;\">Taxation of digital gold is similar to that of physical gold.<\/span><\/td><\/tr><\/tbody><\/table><p><span style=\"font-weight: 400;\">Digital gold, a new-age investment instrument, allows you to invest safely without risking the security of the asset. Not only does it guarantee a seamless investing experience, but it also offers greater <a href=\"https:\/\/www.kredx.com\/investment\/invoice-discounting\/short-term-investment\">investment<\/a> convenience. Further, its ever-increasing popularity is attracting more investors, thereby contributing more to the Indian economy.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>The Indian Government&#8217;s efforts towards a digital economy have reshaped the country&#8217;s $34 billion gold market. As smartphones, e-wallets, and several flexible investment schemes emerge as viable investment platforms, India\u2019s gold investors have shifted their preference. Consequently, digital gold investments have gained popularity in recent times. Demand and supply share an important relationship with investment. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7550,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"audio","meta":{"footnotes":""},"categories":[150],"tags":[872,99,899,93,1151,1143],"class_list":["post-7549","post","type-post","status-publish","format-audio","has-post-thumbnail","hentry","category-gold-investment","tag-digital-gold","tag-gold-investment","tag-invest-in-gold","tag-investment-options","tag-investment-types","tag-physical-gold","post_format-post-format-audio"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7549","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=7549"}],"version-history":[{"count":10,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7549\/revisions"}],"predecessor-version":[{"id":14934,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7549\/revisions\/14934"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/7550"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=7549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=7549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=7549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}