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Bling in the Modern Era: Cost of Digital Gold in India, 2023

Digital gold is a type of investment that allows you to buy gold without having to physically own it. In India and around the world, you can buy digital gold in small amounts, just like you would buy stocks or mutual funds. And, just like physical gold, the digital gold price reflects the current value of the precious metal in the market. So, let’s learn more about the digital gold price, forms, and the factors that affect it .

What is Digital Gold and Its Price?

Gold has been a very popular form of investment and ornamentation in India for centuries now, if not longer. Its cultural significance, along with its ability to retain value, has made it a sought-after asset. In recent years, the digital age has transformed the way Indians access and invest in gold. Digital gold, which allows individuals to buy, sell, and hold gold electronically, has gained significant traction. This innovative approach has brought the timeless allure of gold into the modern era, making it more accessible and convenient for modern investors.

Currently, as of August 2023, the average price of digital gold in India is around Rs. 6,000 per gram of pure 24K gold. To understand why the price of digital gold is what it is, we need to know about all the factors that determine it.

Factors Affecting Digital Gold Prices in India

The determinants of the digital gold price in India include a wide array of national and international matters. Some of the most impactful factors affecting the cost of digital gold are as follows:

  1. Global Gold Demand and Supply: The fundamental law of supply and demand applies to gold. When demand for gold exceeds supply, prices tend to rise, and vice versa. Factors affecting this include jewelry demand, industrial use, and central bank purchases.
  2. International Gold Prices: Digital gold prices are often linked to international gold prices, especially for platforms backed by physical gold. These prices are determined by global factors, such as geopolitical tensions, inflation rates, and currency movements.
  3. Currency Exchange Rates: Gold is priced in U.S. dollars worldwide. Exchange rate fluctuations between the dollar and other currencies can impact the price of gold in those currencies. A weaker dollar usually leads to higher gold prices.
  4. Interest Rates: There is an inverse relationship between gold prices and interest rates. Higher interest rates can boost the value of a currency, making gold more expensive for investors holding other currencies.
  5. Inflation: Gold is often considered a hedge against inflation. When inflation is expected to rise, investors may turn to gold to preserve their purchasing power, driving up its price.
  6. Geopolitical Events: Political instability, conflicts, and crises can lead to increased demand for gold as a safe-haven asset. These events can cause short-term spikes in gold prices.
  7. Monetary Policy: Actions taken by central banks, such as quantitative easing or changes in interest rates, can influence gold prices. Loose monetary policy often supports higher gold prices.
  8. Investor Sentiment: Market sentiment and speculative trading can have a significant impact on short-term gold price movements. Positive or negative sentiment can cause rapid price fluctuations.
  9. Technological Advancements: Advances in technology can impact the demand for gold in industrial applications, affecting its price. For example, increased use of gold in electronics can drive up demand.
  10. Market Liquidity: The liquidity of the digital gold market can influence prices. More liquid markets tend to have prices that closely track international gold prices, while less liquid markets may have larger price spreads.

Popular Forms of Digital Gold and Their Prices

Gold ETFs (Exchange-Traded Funds): Gold ETFs are mutual fund units that represent physical gold. Investors buy these units, which are backed by actual gold stored in vaults. They can be bought and sold on stock exchanges, offering liquidity and ease of trading.

ETF Price per unit in 2023 (approx.)
HDFC Gold ETF
₹50.15
SBI Gold ETF
₹50.10
IDBI Gold ETF
₹50.08
Axis Gold ETF
₹50.06
Kotak Gold ETF
₹50.05

Sovereign Gold Bonds (SGBs): Issued by the Government of India, SGBs are government securities denominated in grams of gold. They offer a fixed interest rate and are backed by the sovereign guarantee. Investors can buy and sell SGBs on the stock exchange.

Currently, in 2023-24, the approximate price of one sovereign gold bond is around Rs. 5,000- Rs. 6,000 per gram. This price fluctuates according to market conditions and is revised every day based on supply and demand.

Gold Mutual Funds: These are mutual funds that invest in various forms of gold-related assets, including ETFs, mining stocks, and gold-related securities. They allow investors to indirectly invest in gold through the fund.

Fund Name NAV in 2023 (approx.)
Invesco India Gold Fund(G)-Direct Plan
₹18.05
Axis Gold Fund(G)-Direct Plan
₹19.45
SBI Gold Fund(G)-Direct Plan
₹18.65
HDFC Gold Fund(G)-Direct Plan
₹19.10

Gold Futures: Gold futures contracts serve as a key financial tool for investors looking to speculate on the future price of gold. These intricate financial derivatives facilitate the buying or selling of a predetermined quantity of gold at a specified date in the future. Traded on well-regulated platforms, these contracts play a pivotal role in the world of finance.

Cryptocurrencies Backed by Gold: Some cryptocurrencies are backed by physical gold reserves. These digital currencies aim to combine the benefits of blockchain technology with the stability of gold.

Cryptocurrency Price in 2023 (USD, approx)
Tether Gold
$1,821.64
DigixGlobal
$1,838.40
Paxos Gold (PAXG)
$1,837.80
Gold Coin (GLC)
$1,838.00

If you are thinking about investing in digital gold, there are a few things you need to keep in mind. First, you need to choose a reputable platform to buy and sell digital gold. There are a number of platforms available to invest in digital gold in India. For example, MMTC-PAMP is a renowned and reliable online provider of digital gold. Payment platforms like PayTM also provide the option to trade in digital gold nowadays. Accordingly, it is important to do your research and choose a digital gold trading platform that is well-regulated and has a good reputation. 

Second, you need to understand the fees associated with buying and selling digital gold. Some platforms charge a commission for each transaction, so it is important to factor this into your investment decision.

Overall, digital gold is a safe and secure investment that can be a good way to diversify your portfolio. However, it is important to do your research and understand the risks involved before you invest.

Conclusion

In essence, digital gold signifies the marriage of tradition with innovation, providing a gateway to timeless wealth in the modern era. Understanding its pricing dynamics, influenced by global factors, and various investment avenues, is paramount. Whether you opt for gold ETFs or cryptocurrencies, choosing a safe and reputable platform and being vigilant about associated fees are vital. Digital gold serves as a tangible reminder that the past can coexist harmoniously with the future in the world of investments.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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