The Indians have a long history of investing in gold, the power of which has grown steadily over the years. As the challenges due to the new variants of Covid-19 (Omicron) continue, we are optimistic about the resumption of consumer confidence. Gold has long been viewed as a hedge against inflation and along with these changes in India’s demographics, the surge in urbanization coupled with rising income levels has played an important role in positively influencing the economy. domestic demand for gold by Indian households.
India is one of the biggest consumers of gold with an estimated stock of over 25,000 tonnes, 65% of which is from the rural community, and there is a huge untapped opportunity for gold loan financiers. We believe that in the coming years more and more gold will be used to fuel the growth of the economy. Recently, the SEBI approved a proposal to establish a gold exchange in India, and given the relevance of this asset class in India, we expect the gold exchange to be formed. in the future. The Gold Exchange will help create a national price structure for gold and will contribute to efficient and transparent price discovery, liquidity of investments, and quality assurance of gold. In addition to this, it will help deliver a multitude of benefits to the entire value chain and also promote compliance among market players.
The pandemic has led to the accelerated adoption of digitization around the world. Digitization has affected all sectors in one way or another, and the gold sector is one of them. With gold, storage is a problem that consumers often face. Digital gold takes the hassle of storage out of the hands of consumers. Digital gold looks a lot like normal gold, but here gold can be purchased online and is stored in vaults by the seller.
When it comes to digital gold, over the years gold-oriented SGBs, ETFs, and mutual funds have grown in popularity. In fact, according to the Association of Mutual Funds in India (AMFI), the number of gold ETF folios increased from 3.1 lakh to 24.11 lakh between September 2018 and September 2021. Digital gold has also the top due to factors such as purity. , no design cost and price consistency compared to physical gold. Users can buy digital gold in much smaller amounts, making it a good choice for people who don’t want to invest a lot or are skeptical about this mode of investing. However, the lack of direct ownership of the underlying physical gold, fluctuations in spot gold prices and limited trading hours will take time for consumers to adjust to these new offerings in the market.
The future is the further integration of technology in the gold sector. As Indians brace themselves for the massive use of digital wallets and online payment platforms, we anticipate that the future will provide a great opportunity for secured credit cards and gold wallets. In the recent past, many mobile electronic wallet companies and brokers have set up gold wallets for their consumers by allowing them to purchase certified pure 24k gold; Make fast, cost-effective money transfer payments and enjoy hassle-free micro-lending services. Although digital gold does not currently fall directly under any regulatory body, there is an element of risk as the rules are not yet in place.
However, to determine the speed at which the industry innovates and the ease with which consumers adapt to these innovations, banks and NBFCS like us strive to meet industry demand with more readily available solutions. Building consumer confidence and awareness, as well as innovation, can help improve the image of the Indian gold industry, thereby stimulating domestic demand and playing a central role in rebuilding household finances in a post-pandemic world.
George Muthoot Alexander is the Managing Director of Muthoot Finance Ltd.