Digital Gold Sales Surge 62% in October Fueled by Dhanteras Festival

The National Payments Corporation of India (NPCI) reported that digital gold sales through UPI channels hit a new record in October, with a substantial 62% increase in value. Purchases rose to Rs 2,290 crore, up from Rs 1,410 crore in September. This surge was particularly pronounced around Dhanteras, which fell on October 18th, a day considered highly auspicious for purchasing gold in India.

Sales of digital gold, facilitated by payment apps like Paytm, PhonePe, Jar, Amazon Pay, Google Pay, and jewelry retailers like Tanishq, have shown consistent growth throughout the year. Starting from Rs 762 crore in January, the monthly sales value reached Rs 2,290 crore by October. The number of gold purchasing transactions also saw a 13% increase, climbing from over 103 million in September to 116 million in October.

Several factors contributed to this rising customer interest: the inherent appeal of gold as a safe-haven asset, its increasing price, the convenience and ease of purchasing digital gold (allowing transactions from as low as Re 1 up to Rs 2 lakh daily), and the benefit of fractional ownership.

Impact:

Despite the positive sales trend, the Securities and Exchange Board of India (SEBI) issued a warning in early November, highlighting that digital gold is not a regulated product in India. Concerns have been raised by some social media influencers about the potential difficulty customers might face in withdrawing funds if digital gold platforms cease operations. However, some platforms have indicated no significant drop in business post-SEBI's directive.

Most fintech platforms offer digital gold as a savings or investment product, where the gold value is tokenized by entities such as MMTC-PAMP or SafeGold. Customers can typically sell their holdings at any time. Investing in digital gold involves Goods and Services Tax (GST), storage costs, and platform fees.

An alternative for investors is Gold Exchange Traded Funds (ETFs), which are regulated by SEBI and offer fractional ownership with generally lower charges, though they require a demat account, similar to stock market investments. This has led many users to prefer the simpler purchase process of digital gold over Gold ETFs.

Impact Rating: 6/10 (Reflects consumer behaviour, market trends, and regulatory concerns affecting a growing investment category.)

Difficult Terms Explained:

• UPI (Unified Payments Interface): A real-time payment system developed by the National Payments Corporation of India that allows users to transfer funds instantly between bank accounts.
• Dhanteras: A Hindu festival celebrated on the first day of the five-day Diwali festival. It is considered an auspicious occasion to buy gold, silver, and other valuables.
• NPCI (National Payments Corporation of India): An organization that operates retail payment and settlement systems in India, including UPI and RuPay.
• Fractional Ownership: The ownership of an asset (like gold) by multiple individuals or entities, where each owner possesses a fraction of the total asset. This allows people to buy small amounts of gold.
• Safe Haven Asset: An investment that is expected to retain or increase its value during periods of market turbulence or economic downturn. Gold is traditionally considered a safe-haven asset.
• SEBI (Securities and Exchange Board of India): The statutory body responsible for regulating the securities markets in India.
• Fintech Platforms: Financial technology companies that use technology to provide financial services, such as payment apps or digital investment platforms.
• Tokenized: In this context, it means that the digital platform represents a certain quantity of gold held physically by a custodian company. The digital record of ownership is "tokenized."
• MMTC-PAMP: A joint venture between India's MMTC Ltd and Switzerland's PAMP SA, specializing in precious metals.
• SafeGold: A platform that provides digital gold services, backed by physical gold reserves.
• GST (Goods and Services Tax): A consumption tax levied on the supply of goods and services in India.
• Gold ETFs (Gold Exchange Traded Funds): A type of investment fund that tracks the price of gold. They are traded on stock exchanges like individual stocks.
• Demat Account: An account used to hold shares, bonds, mutual funds, and other securities in electronic form. It is required for trading in the stock market and for investing in Gold ETFs.