7 hrs ago
Gold EGRs Struggle to Attract Investors Despite Market Buzz
Electronic Gold Receipts, or EGRs, let people hold gold electronically while physical gold is kept in approved vaults.
However, many investors are not using them yet.
One reason is that not many EGRs are traded each day, so selling them quickly can be difficult.
The difference between buying and selling prices can also be wide.
If someone wants to turn an EGR into physical gold, they must pay 3% GST.
Turning physical gold into an EGR requires taking it to an approved vault manager for purity testing.
This process can involve fees and may be inconvenient.
Gold ETFs and physical gold remain more familiar to investors.
Electronic Gold Receipts are backed by physical gold stored in accredited vaults but remain a relatively new investment format.
Daily EGR trading volumes on the NSE and BSE are typically below ₹1 crore to a few crore rupees.
Low liquidity, wide bid-ask spreads and limited market-making activity can make large transactions difficult to exit quickly.
Redeeming an EGR for physical gold attracts 3% GST, although exchange-based EGR trading is GST-free.
Converting gold or jewellery into EGRs involves vaulting, purity checks, fees and limited infrastructure, giving gold ETFs and physical gold a familiarity advantage.
- Who
- Investors, market participants, jewellery owners and vault managers are involved; Adhil Shetty of BankBazaar commented on EGR adoption.
- What
- Electronic Gold Receipts are struggling to attract investors despite broader enthusiasm for gold.
- Where
- EGRs trade on the NSE and BSE, while physical gold is stored or processed through accredited and SEBI-registered vault managers.
- When
- The article describes current trading and adoption conditions but gives no specific date.
- Why
- Low liquidity, redemption taxes, conversion costs, limited vault infrastructure and unfamiliarity are restricting adoption.
Key facts
- Product
- Electronic Gold Receipts are backed by physical gold held in accredited vaults.
- Trading venues
- EGRs trade on the National Stock Exchange of India and the Bombay Stock Exchange.
- Typical daily volume
- Trading is generally below ₹1 crore to a few crore rupees.
- Redemption tax
- Converting an EGR into physical gold attracts 3% GST.
- Trading tax
- Exchange-based EGR trading is GST-free.
- Conversion process
- Physical gold must be assayed and converted through a SEBI-registered vault manager.
- Main alternatives
- Gold ETFs and physical gold retain greater familiarity among investors.
Quotes
Adhil Shetty
CEO of BankBazaar who commented on investor adoption of electronic gold receipts
“Gold's popularity as an asset doesn't automatically transfer to a new format for holding it.”
businesstoday.in
Sources
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