Digital gold needs no intro: it is the most happening investment in world markets today making headlines for months now. There is however reportedly, an oversupply of paper gold or digital gold in the world for a while, than actual physical gold in circulation, a point missed by most of us retail investors. Trading/holding stocks in digital gold has made this possible. Holding digital gold is also hassle-free than physical possession. It is said that the ratio of paper gold to physical existing gold in the world could be as skewed as 100:1 or even 250:1. So could this bubble burst anytime crashing the gold markets one fine day? With not enough real gold to back up the digital gold, it is possible that the world economy could be heading towards a crash so far as gold market is concerned. Probably that is why, those like Warren Buffet allegedly keep off digital gold. Digital gold could be a good short term investment than a long term plan, it is said. ETFs seem to be the most favoured platform of gold investment. Owning the physical gold is still the safest way as we know because we are in direct possession of the actual gold that can be stashed away in a vault.
What do I attribute to digital gold working? I, as an Indian housewife, am used to hoarding gold as traditional practice, and don’t fear the fall of the gold prices. But it is true that we women in India hold actual gold in our hands, how much so ever minimum could that be. For us, gold is LIQUIDITY that is matchless. Gold is economic freedom. And gold appreciates maximum, next only to real estate. All these factors make gold the most favoured investment for us ladies. If gold has to crash, then the bubble has to burst in every sector should loans be recalled at short notice, for that matter. World economy will collapse. Just recall housing loan enmasse and see what happens. Domino’s effect. Like a pack of cards, everything has to come crashing in that case. Reality is never the point in the world of economics. How do credit cards work then? Is gold the only bubble waiting to burst? Nations borrow heavily. But I do understand the need to cap the gold market at some point of time. As someone who is in the line of investment averred, gold is not a productive investment and therefore its growth is unnatural. Stocks normally boom when the productivity index improves and quarterly reports show good results. Gold however obeys no such laws. Very much akin to real estate, gold appreciates in value only because of the superficial demand its scarce availability manages to create as against its actual supply. Having said that, a humble housewife/grandma here with no compatible background to post such a comment! But I take the liberty with my half baked info/knowledge!
Can digital gold be realized into real gold? I observed this from a couple of Indian banks. First of all even the leading ones did not have the digital gold platforms that sold 24 k gold gram by gram (or ounce by ounce). ETFs/Gold funds were on offer. But there was this one bank that sold digital gold for a few months which on demand was stated to be deliverable at your doorstep. Product withdrawn from bank services with November end, no wonder! The digital gold sale by ounce did not even last a good six months! Probably the reason is that the bank feared inability to keep up with real supply on demand from customers. However, I see that digital gold sale ounce by ounce is still on offer by a few digital platforms and jewelry houses. The jewelry houses in India cleverly state that your digital gold can be acquired only as gold coins or jewelry from their premises! Well, that means, you can never encash your digital gold at these jewelry houses! In short, by investing in digital gold in these jewelry houses, you are only paying in installments/lumpsum for your future gold purchases! Govt of India and the Reserve Bank of India (RBI) do not regulate these platforms trading in digital gold and therefore investment in these platforms may remain risky.
As I see, the govt of India that was issuing sovereign gold bonds for years has since withdrawn the bond issuances from last year! The big headache of paying off the maturing bonds in near future awaits the Indian govt!
Any other info I may glean, I shall update here with.
What do I think about middle class investments in digital gold. I think if you can take the risk, you can afford to invest in digital gold. It still is a great investment – long term investment in my PERSONAL opinion. Its worth the risk, provided you have other investments to bank on, in case of an unprecedented crash. So far world has not witnessed such a debacle, but let us wait and watch.
vijiravindran's 