Ways to Invest in Gold?
Well historically the most common way to invest in Gold has been to buy physical gold in the form of
- Coins
- Bullion and
- Jewellery
Apart from that, we have Sovereign Gold Bonds, Gold Mutual Funds and Gold ETFs to choose from.
But during a pandemic, another method of investing in Gold that has been gaining immense popularity is in the form of Digital Gold.
Gold is still as sexy as ever for investors - it represents a credible cultural symbol of wealth and has many inherently desirable features; scarce, stable, safe and valuable. However, it is still characterized by many of the same trading methods it has used since the 16th century and needs a makeover.
The potential of the blockchain to develop gold as a store of value or a medium of exchange is significant. Could inherent properties such as transparency, digitalization, transferability, divisibility, and security fundamentally change the way gold trades better?
What is the BLOCK CHAIN?
Blockchain is a chain structure consisting of blocks (BlockChain) is a distributed database system that provides encrypted transaction tracking. In money transfers, each step forms a block. For example, each of the information such as the sender's name, the amount sent is a block. These blocks created during the transfer process are encrypted, never changed, and made unbreakable. These blocks are distributed to everyone on the entire network and everyone has the same encrypted information. Blockchain's principle of decentralization is based on this technology. The information on the block can only be processed by the buyer and seller specified on them. In addition, Blockchain technology is transparent, anyone can examine the blocks accumulated so far and review them.
How blockchain technology can add value to the gold trading market
As with other industries, the benefits that blockchain technology can bring to gold trading are numerous. For starters, it can help to improve price discovery, smooth settlement and lower counterparty risk. It can also make it simpler for traders to verify who owns the underlying bullion or to properly fractionate bullions, which will in turn create a more liquid market for buyers and sellers to operate in.
Once the market is more liquid and easily verifiable, there will be a greater trust in the market which should counter any doubts about price fixing and the authenticity of the underlying asset. This would have the added benefit of attracting a new type of customer to the market, the type that had previously begun to sour at the idea of gold trading because of the barriers of entry created by its own inefficiencies.
Blockchain technology would also allow for the creation of new types of securities based on the actual possession of gold as opposed to the types of derivatives used today which are based on part possession only. These new types of instruments would further boost liquidity and increase circulation, enhancing gold’s reputation as a means of exchange once more. Blockchain would definitely bring gold’s sexy back.
Digital gold is a convenient and cost-effective way of purchasing gold online in small fractions (as low as Rs 10 on Groww) You can buy, sell and accumulate gold of 99.9% purity anytime at the prevailing market price. The digital gold you purchase is stored in secured vaults and insured.
