UPI push sparks 377% rise in digital gold in 16 months

Investing in gold is undergoing a shift, with more consumers opting for digital gold even as prices of the yellow metal spiral.

The volume of digital gold purchases through UPI (unified payments interface) surged 377% in 16 months to 99.77 million transactions in August against 20.92 million transactions in April 2024, data from NPCI showed. The value of gold purchases more than doubled during this period to ₹1,184 crore last month from Rs 550 crore in April 2024.

The spurt, according to experts, is driven by expectations of further rise in gold prices as well as the convenience of buying it digitally.

The 24 karat 1 gram gold price rose about 44% year-on-year to ₹11,021 as compared with ₹7,633 same time last year.

The rise in gold price has helped spurt in the value of purchase, while the rise in volume was prompted by the expectation of further rise in the price of the yellow metal, said Saumil Gandhi, senior analyst (commodities) at HDFC Securities. "The convenience of buying gold online is also making a difference. Consumers can opt for a small unit to fit to their budget when purchased digitally, making this form a popular choice," he said.

Consumers use service providers like PayTM, Google Pay or PhonePe to buy digital gold, primarily sold by entities such as MMTC PAMP and Augmont Goldtech. Jewellers like Tanishq and Senco also offer digital gold.Digital gold investment is made in certified 24 carat. The gold is held in the vaults of the custodian against the digital certificates issued to the buyers. The certificates can be redeemed either in form of cash or consumers can visit the designated shops to get gold physical form. Digital gold has seen one of the highest growth prints both in volume and value among several other top product categories for UPI transactions.

The UPI channels are most used for buying groceries with the latest monthly volume being at ₹68,116 crore, NPCI data showed.

NPCI lists the top 10 merchant categories for both high and medium volume categories every month. Purchase of digital gold first earned a place in the top 10 medium transacting categories in April last year. Since then, it has been rising steadily. A structural shift is happening in the way consumers purchase products today, India's chief economic advisor V Anantha Nageswaran said in Kolkata last week. Such purchases are likely to grow as consumers will have higher disposable income with the GST rate cuts over and above the income tax cut, he said.