Gold in demat format, anyone?

Indians’ propensity for gold has been well-documented, be it festivities or weddings. But the twist in the tale is there is a new investment class emerging within the same category. E-gold, the newest kid, is fast gaining currency and making investors sit up and take notice. 

“E-gold is getting wide popularity these days due to the flexibility in transactions. Easy mode of administering will draw more into it,” says Kartik Javeri, a certified financial planner.

Want to know more? Read on.
It’s an electronic form of gold one can purchase through a de-mat account. People interested in this mode of investment need to open a separate demat account with any of the depository participants under the National Spot Exchange.

It can be converted into physical form of gold by surrendering specific units to the exchange. The value of e-gold is on par with the value of physical gold, unlike the ETF, where the value is linked to the net asset value (NAV).

E-gold transactions are regulated and controlled by forward market commissions and the ministry of consumer affairs.

Cost of purchasing e-gold
Like any other investment option, basic transaction charges are applicable to e-gold, too.  For the purchase and sale of gold electronically, brokerage fee needs to be paid to respective firms. It varies from 0.25% to 0.5%. Besides, one needs to pay annual maintenance charges to the depository participant.

Advantages
Here, size is no bar. Investors are free to buy and sell gold in small denominations like 1 gm or 2 gm. Electronic form of gold offers better liquidity as investors get their money back without much loss of value. Also, it can easily be converted into physical form of gold.

“It is better for long-term investors due to various reasons. For instance, if a person wants to arrange gold for the child’s marriage after 10 years, it gives you a better option as you can make purchases in small quantities. Also, storage becomes easier and safe in this mode of buying,” says Raunak Roongta, an independent financial planner from Mumbai.

“Although it has many advantages, one should asses the investment needs and go for it. People who have large portfolios can diversify through these kinds of investment options,” chipped in Arnav Pandya, a certified financial planner.