Gold is a precious metal that dates back centuries and has been a symbol of wealth and a medium of exchange for ages, even before the existence of any formal currency. It has been a trusted store of value globally throughout history and continues to have relevance even now, centuries later.
Today, in a fast-evolving world driven by digital disruption and COVID protocols, how we consume products, services and information has also changed. We are in a digital-first economy where investors’ perspective towards gold, or for that matter, any asset class, is slowly but surely shifting to a digital model.
In 2021, digital gold or e-gold, which is physical gold that is bought, held, and sold online, became a big hit with new-age investors, driven by the millennials and the digitally native generation. This, coupled with the trust the precious metal invokes as a safe asset class and the high returns it generates over the long term, attracted many takers, especially in an uncertain pandemic economy.
This year, the pandemic acted as a catalyst since the complete process of buying, selling, storing, and even gifting of digital gold is online, adding to ease in a socially distanced world alongside safety and security. With the majority of the Indian workforce being digitally-savvy and having developed a great understanding of online offerings, investor preferences have also evolved over 2021.
I expect 2022 to witness an even greater demand for digital gold along with other new-age assets. With the New Year just around the corner, here are some trends that I am bullish about as we head into an increasingly digitally driven world;
• Surge in small ticket investment portfolios – India has a millennial population of over 34 percent, around 440 million people—making India a significantly young nation and a market with the largest millennial population. The average age of an Indian is now approximately 28-29 years, and the average Indian youth starts working by the age of 25-26. By the time they’re 29, many have relatively stable jobs and decent income streams and are now on the lookout for managing personal finances.
Hence to start, many wish to park or invest money in highly safe or liquid assets. Now, with these early-career professionals earning modest salaries also entering the investing world, the amounts they invest will be smaller but consistent over a long period, in the hope to create wealth in the long run. The pandemic has helped our youth realise the importance of saving for a rainy day; thus, a new breed of investors has emerged. These new-age investors are looking to invest in new assets using new methods.
Like mutual fund systematic investment plans or the more traditional financial derivatives, investment in digital gold is starting to garner interest owing to its inherent benefits. Fractional and consistent investments that enable investors to build wealth over time and the convenience of doing it from the comfort of their homes with a click of a button are some of the factors that make these new-age investors migrate towards this option. We expect this trend to see a rise in the upcoming year.
• Changing perspectives and legacy planning – While Indians have historically had an emotional connection with gold jewellery, an increasing number of individuals are now viewing gold as an investment asset to diversify their portfolios. With more investment awareness, one is now privy to the fact that physical gold offers a lesser return on capital than its online counterpart and comes with hassles related to storage and security.
Moreover, a loss is witnessed when jewellery is sold due to different making and wastage charges on jewellery and the questionable quality of gold. People are increasingly concerned about holding physical gold and would rather only enjoy its benefits. 2022 will see investors seeking maximum returns while investing and enjoying sustained gains in the asset’s overall value as time passes. This will help them not only secure their future and build wealth but reap benefits well beyond 2022 for their current or future generations as a legacy asset.
• Gifting Gold – The pandemic has left a lasting impact on all aspects of our lives. Especially with social distancing, interaction and consumption patterns of consumers have evolved. There is already a shift towards sending gifts online to loved ones to ensure the safety of both parties. This has also led to users searching for unique gifting options, particularly those that have value and thought.
Apart from other available options, Digital Gold has turned out to be a sensible gifting option given the convenience and benefits to the buyer and receiver. Since a buyer can buy Digital gold for as low as ₹ 100, it can also be a perfect gift not just for the bigger social occasions where gold is traditionally gifted but also for the fast-approaching holiday season. A gift whose value will only appreciate over time.
• Regulatory support – In 2022, I believe there will be greater momentum in conversations and action towards a progressive regulatory framework for digital gold in India. Once we have policies to regulate digital gold, there will naturally be greater adoption, with an increasing number of Indians turning to digital gold as a long-term investment. After all regulated growth, is the best growth.
• Lastly, a Do-it-yourself or Take control culture is on the rise – With such a vast amount of information available to a user at the click of a button, individuals are consuming knowledge and making informed decisions. Financial planning is a case in point. Through smartphones and highly user-friendly wealth-tech apps, the rising trend of managing one’s finances on their own will surely and steadily become a norm going forward. 2022 will see large-scale adoption of online wealth-tech platforms and their investment offerings, be it Gold, Mutual Funds, Stocks, Crypto, or the latest trend being Non-fungible tokens (NFT’s).
As long as services are built keeping the evolving needs of the consumers in mind while maintaining transparency and trust, there will always be takers for new offerings.
As an individual who has been associated with the gold and bullion market for over three decades, I am a firm believer in the precious metal. I am confident that the coming year will be exciting for adoption and regulation. Over the multiple economic ups and downs, gold has still managed to provide a CAGR of around 15 percent, which is three times what one would get in, probably, one of the most trusted asset classes, a Fixed Deposit. The marriage of trust in gold with the convenience of technology will only make this asset even more valuable and popular in the eyes of digital natives.
Given India’s affinity for gold and the significance it holds traditionally, gold investments will certainly evolve but are here to stay. The future potential seems to be rather rewarding for gold investors/holders.
The author, Ashraf Rizvi, is CEO and Founder at Gilded. The views expressed are personal
