By Arpan Varghese
A digital revolution is reshaping India’s $34 billion gold market, with smartphones, e-wallets and flexible investment schemes drawing new buyers into a business dominated by traditional, face-to-face transactions
Digital payment systems have ballooned in popularity in India since the government scrapped large-value bank notes in 2016.
Among these offerings are applications that enable smartphone users to buy, sell or store gold – even in small amounts – kept in secured vaults operated by MMTC-PAMP India Pvt Ltd, a joint venture between MMTC Ltd, the largest national trading firm, and Swiss gold refiner PAMP.
Although online gold purchases have been growing globally for years, they are a relatively recent phenomenon in India, where jewelry and bars of the precious metal tend to be kept in hand and given as gifts.
“In India, the action is really starting now. The digitization of the economy will certainly lead to digitization of gold,” said Somasundaram PR, managing director of World Gold Council’s (WGC) India operations. “It is poised for significant growth, possibly in the next 12-24 months.”
(For a graphic on India’s gold market click)
The WGC estimated total Indian gold demand at 727 tonnes (25.6 million ounces) in 2017, and could be up to 800 tonnes in 2018. In China, the top consumer, 2017 demand was 953.3 tonnes.
It is difficult to gauge how many new buyers are entering the market because of online access. The digital payments firm Paytm said that in the first six months after it began offering digital gold last April, it facilitated about $18.4 million worth of sales – a tiny fraction of the Indian gold market.
With the vast majority of purchases made in the traditional way, demand for physical gold isn’t abating, “especially when physical gold plays an important role at Indian weddings,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd.
(For a graphic on physical gold demand in India, China and the world click)
Besides convenience, Indian consumers are attracted to competitive pricing and ability to make purchases in tiny increments.
Gold-based financial offerings, including Gold Accumulation Plans (GAPs), allow users to buy and store gold in fractions as small as 0.1 grams – an amount that would be an uneconomical to trade physically because of the associated handling costs.
These accumulation plans, along with gold-backed bonds and websites selling coins and jewelry that can be shipped for free or cheaply within India, are especially appealing to young Indians. In the past, even those with an enduring affinity for gold have needed to wait until they have saved enough to build holdings.
Joe Jacob, a 29-year-old entrepreneur in the southern city of Bengaluru, recently bought 5 rupees (8 cents) worth of digital gold as a “trial investment.”
Keep reading …