INVESTMENT IN GOLD
Have you ever thought why investing in gold is said to be the best investment?
From the time of ancient civilizations to the modern era, gold has been the world's currency of choice. Gold is very precious because obtaining gold from the mineral is a very tough job, that's why gold has such high prices.
Nowadays a new concept has been introduced that is digital gold currencies.
WHAT IS DIGITAL GOLD CURRENCY ?
Digital gold currency is a form of electronic money based on mass units of gold. It is a kind of representative money, similar to the US paper gold certificate (these were exchangeable for gold on demand ).
FEATURES OF DIGITAL GOLD
1.Universal currency: Digital gold currency offer their customer a borderless and global currency system without any restrictions from any country. Gold has recognized international currency codes all over the world under section ISO4217 of the stock market.
2.Asset Protection: Investing in digital gold is the safest. If you invest in digital gold the risk involved is the lowest as compare to others. Digital gold currencies hold 100% of client's funds in reserve and not like fractional reserve banking. These golds can be exchanged via digital certificates.
3.Non-Reversible transaction: Digital gold currency generally do not have services to dispute or reverse charges. So reversing transactions in any legitimate error or any other interruptions while making order is difficult, if not impossible.
4.Introduction of electronic golds[e-golds]: Digital gold products are electronic receipts proving investments in the yellow metal by investors but not actual gold. Instead, the original sellers of such digital gold investment products keep physical gold in vaults. The product is similar to gold exchange-traded fund (ETF) units. It was first introduced in 1996.
WAYS TO INVEST IN DGC
1.Digital gold/ Online buy of gold: Digital gold can be bought on various online platforms like Paytm, Phonepe, Gpay, etc.
- Charges : No charges but you have to pay if you ask for physical delivery of gold.
2.Gold ETF's: Gold ETFs are basically exchange-traded funds traded on the stock market that invest in gold.
- Charges : You have to first open your Trading and Demat account on discount brokers app /any other platform etc. Then only you can order and the charges are in the expense ratio of 0.5% to 1% depending upon the value of the gold you desire to buy.
3.Gold mutual funds: Gold funds are types of mutual funds that are directly or indirectly invested in gold reserves.
- Charges : You have to make payments through online app like Paytm money and similar app like this. The charges are in expense ratio of 1% -2%, same in the case of gold ETFs.
4.Sovereign Gold bonds: SGBs are issued by the rbi on the behalf of the government with an assured interest of 2.50% per annum.
- Charges : You can invest through discount brokers, brokers, commercial banks etc. No charge.
PROS AND CONS OF INVESTING IN DGCs
PROS
1.Flexible/Low-cost investment: The investment starts from ₹1 which is next to negligible, but if you want physical delivery then you have to invest in around 1/2grams of gold.
2.Safer than physical gold: Physical gold can be damaged and there is also a fear of getting theft of physical gold whereas digital gold cannot be stolen and it is risk-free. The risk involved in digital gold is very less.
CONS
1.Frauds: These, days frauds are very common in the digital world, so there is a probability that you might get cheated by someone, who is involved in such malpractices of making people fool. You can be easily fooled by anyone while investing in digital gold so you have to be very careful while investing in it.
2.Irreversible transaction: The transaction cannot be reversed, i.e you can't cancel your transaction once made. Suppose by chance due to a technical glitch or any other problems you made an order but that was not your intention so you cannot cancel your transaction and you have to buy or invest in digital gold for that particular transaction.
GOVT. /SEBI RULES AND REGULATIONS
SEBI barred registered brokers and investment advisers from supplying digital gold and other unregulated funding products. The reason NSE and BSE barred brokers from selling digital gold was that it was not a security. Now securities are defined under the Securities Contract Regulations Act (SCRA) and registered members of stocks exchanges can only deal in such securities. Since digital gold was not a security, exchange members could not deal in digital gold. According to SEBI, offering such products was once a violation of the Sebi Act and, as a consequence, could lead to financial penalties and license cancellations as well.
Because of this, some fintech businesses promoting digital gold had to end such sales while others hived off the digital gold supplying to their unregulated father or mother entities. This ban opened up an arbitrage opportunity, with RBI-regulated entities being reigned in and unregulated firms being able to offer digital gold except any penalties. As per the sources, the authorities are in the procedure of placing up regulated gold exchanges below Sebi’s regulatory purview. SEBI has already accredited the framework for operationalizing gold exchanges. This framework would enable the facilitation of trading in gold via digital gold receipts.
OUR OPINION ON DIGITAL GOLD
We would suggest that one should invest in digital gold but should think twice or thrice before investing in digital gold. In India, many people are not aware of investing in digital golds and the irony is that we are among the top countries whose population invest in physical gold the most, so we hope people should be aware of digital gold currencies so that it can give a boost to digital markets/securities. It will also help to stabilize our market.
Happy Learning
THE SUCCESSLOGY
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