Gold impacts investors by providing a hedge against inflation and market downturns, offering portfolio diversification and potential capital appreciation. However, its price volatility requires careful risk management, says Sachin Kothari in an exclusive e-mail interview with Zee Business.
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Sachin Kothari is the Director of Augmont Gold for All, India’s largest fully integrated gold player, encompassing refining to retailing. As a Chartered Accountant (CA) and a second-generation entrepreneur, Mr. Kothari brings over two decades of invaluable experience in finance and strategic management to his role at Augmont.
1. How do you foresee the recent customs duty cut impacting gold investors in the long term?
The lower prices may impact returns on these investments. However, lower prices may also make gold more accessible to new investors, which could increase demand and potentially stabilize prices in the long run. The lower duty may make new SGB purchases more affordable, which could increase their appeal as a secure investment. However, the lower prices may also affect the value of existing SGBs. Overall, the lower duty may stimulate demand, boost the jewelry industry, and contribute to overall economic growth. It may also set the stage for a more active precious metals market.
2. In the current market, do you believe that gold prices are increasingly being influenced by demand dynamics rather than the fluctuations in the US dollar? How does this shift impact investors?
Gold prices are influenced by several key factors, other than fluctuation in US Dollar:
a) Economic Conditions: Inflation, interest rates, and currency fluctuations, especially the strength of the US dollar, directly impact gold's appeal as a hedge and store of value.
b) Geopolitical Uncertainty: Political instability, wars, and global crises drive demand for gold as a safe-haven asset.
c) Supply and Demand: Mining production, central bank reserves, and jewelry demand, particularly in countries like India and China, affect gold prices. Seasonal demand during festivals also plays a role.d) Market Sentiment: Speculative trading, investment in gold ETFs, and shifts in market sentiment can cause price volatility.
e) Government Policies: Regulations, taxes, and import duties in major gold markets can influence both supply and demand.
Gold impacts investors by providing a hedge against inflation and market downturns, offering portfolio diversification and potential capital appreciation. However, its price volatility requires careful risk management.
3. Some experts speculate that the government might get bigger reforms in terms of Sovereign Gold Bonds. would you like to share any thoughts of yours on this, and how might it impact the market?
Revenue loss to the government may be approximately Rs 26000 crore due to customs duty cut but the same is likely to be compensated by import of gold through the official channel. SGB is one of the most expensive tools for government borrowing now as gold prices have elevated. And it seems, uncertain whether the government will issue new securities during the current fiscal year.
The last tranche of the SGB scheme was scheduled for redemption on August 5, 2024, the government saved around Rs 182 crore of liability in SGB redemption by reducing 9 per cent customs duties on gold in the budget. The government almost paid Rs 1,908 crore to the investors holding 2.75 tonnes of August series SGB as per the redemption price of around Rs 6938/gm. If there had been no customs duty cut, redemption gold prices would have been close to around Rs 7600/gm, which would have led to an outflow of nearly Rs 2090 crore.
4. How is digital technology being utilized to improve the customer experience for gold buyers, and what innovations are you seeing in this space?
Technology advancement has been boon for improving customer experience for buying gold:
a) Fractional Ownership of Gold: Platforms like Augmont offer digital gold, allowing customers to buy gold in small amounts and store it digitally. It enables customers to buy gold as low as Rs 1, lowering the entry barrier for gold investment.
b) Online Marketplaces: Fintech Platforms offer options to buy and sell digital gold, making it convenient for mass customers to invest in gold without physical delivery.
c) Mobile Apps: Specialized apps from jewelers and financial institutions allow customers to buy, sell, and manage their gold investments on their smartphones.
d) Virtual Try-Ons: Augmented Reality (AR) allows customers to virtually try on jewelry before purchasing, providing a personalized shopping experience.
e) Blockchain Technology: Blockchain is being used to ensure the authenticity and traceability of gold. Each piece of gold can be tracked from the mine to the consumer, ensuring it is conflict-free and authentic
f) AI and Data Analytics: AI-driven analytics provide insights into market trends, helping customers make informed decisions about buying and selling gold.
As technology continues to advance, these trends are likely to strengthen, further transforming the gold investment market.
5. How have consumer preferences for gold as an investment evolved in recent years? Are there noticeable trends among different demographics, such as millennials and Gen Z?
Both millennials and Gen Z prefer digital platforms for their investments. They favor apps and online services that provide ease of use, transparency, and quick transactions. While traditional gold investment remains popular, younger investors are increasingly using gold as part of a diversified portfolio. They view gold as a hedge against market volatility and inflation.
Gen Z, being digital natives, are early adopters of new investment technologies. They are more inclined to experiment with digital gold and other innovative financial products. Social media plays a significant role in influencing Gen Z's investment decisions. They follow influencers and financial educators who advocate for diversified investments, including gold.
7. How does Augmont Gold for All cater to different types of investors, from beginners to seasoned investors?
Augmont Gold for All caters to different types of investors, including jewelers, individual investors, and bullion dealers, by offering tailored products and services that meet the specific needs of each group.
a) For Jewellers: Augmont offers wholesale gold and silver at competitive rates, allowing jewelers to purchase in bulk for their retail operations. This helps jewelers manage their inventory efficiently.
b) For Investors: Augmont’s platform allows individual investors to buy, sell, and store digital gold in small, affordable increments, making gold investment accessible to a wider audience, including first-time investors. Augmont provides educational resources, webinars, and access to financial advisors to help individual investors make informed decisions about their gold investments.
c) For Bullion Dealors: Bullion dealers benefit from Augmont’s competitive pricing, with access to real-time market rates and the ability to trade large quantities of gold and silver efficiently. Bullion dealers have access to market insights, analytics, and tools provided by Augmont, enabling them to make data-driven decisions and stay ahead of market trends.
8. How does Augmont ensure the quality and authenticity of the gold provided to its customers?
Augmont sources its gold from accredited and reputable suppliers who adhere to strict quality and ethical standards. This ensures that the gold is not only of high quality but also responsibly sourced. All gold sold by Augmont is hallmarked by government-approved agencies, guaranteeing the purity and quality of the gold. The hallmarking process involves testing the gold for purity and ensuring it meets the specified standards. For digital gold, Augmont ensures that the gold offered is 24 karats with 999.9 purity, which is the highest standard for gold. Augmont provides customers with certificates of authenticity and purity for every purchase, whether it’s physical or digital gold. These certificates detail the purity, weight, and other relevant information.
9. What differentiates Augmont Gold for All from other gold investment platforms in the market?
Augmont offers a fully integrated ecosystem from refining to retail. Unlike some platforms that focus solely on digital gold, Augmont provides both digital and physical gold services, catering to diverse investor needs. Augmont seamlessly combines both physical and digital gold options, catering to the preferences of a wide range of investors. Customers can easily convert their digital gold holdings into physical gold and vice versa. Augmont’s gold is refined and certified by LBMA-approved facilities, ensuring the highest standards of purity and authenticity. Gold stored with Augmont is kept in highly secure, insured vaults, offering peace of mind to investors who choose to store their gold rather than take physical delivery. Augmont SPOT platform offers real-time market prices and data, enabling investors to make informed decisions quickly and confidently.
10. Can you explain the various investment options available through Augmont Gold for All, such as Gold Savings Plan and others?
Augmont Gold for All offers a diverse array of investment options, from digital and physical gold to gold-backed financial products and savings plans.
a) Augmont Gold and Silver SIP - Augmont’s Gold and Silver SIP allows customers to invest a fixed amount regularly into digital gold and digital silver. Over time, these investments accumulate into a substantial gold and silver holding. The SIP approach helps in averaging out the purchase price of gold and silver over time, reducing the impact of market volatility and making it a disciplined way to invest.
b) Augmont Gold on EMI - This plan allows customers to purchase gold on a monthly installment basis, making it easier to invest without a lump sum payment. After the completion of the plan, the accumulated gold can be delivered in physical form.
