The National Stock Exchange of India has launched the Electronic Gold Receipts (EGRs). It will offers the investors a new and regulated way to buy and trade gold digitally. This initiative is aimed at to modernizing gold investment in the country by merging the safety of physical gold with the convenience of the electronic trading. The NSE has recently announced the successful dematerialization of a 1000 gram gold bar into an Electronic Gold Receipt.
What are Electronic Gold Receipts (EGRs)?
Electronic Gold Receipts are commonly known as the EGRs. This electronic securities are issued against physical gold which deposited with a SEBI accredited vault manager.
In the simple terms EGRs represent real the gold stored securely in certified vaults while the investors hold ownership digitally.
These receipts are function like shares or securities and it can be traded on the stock exchange platform just like share or stocks.
As they are held in dematerialized form investors does not need to physically store the gold or worry about its safety.
The launch of EGRs is expected to bridge the gap between the traditional physical gold ownership and modern financial markets.
How EGRs Work in the Gold Market
Under the EGR framework the physical gold which deposited in approved vaults is converted into the electronic receipts. These receipts are then traded on the exchange platform.
Importantly every EGR is backed by the actual physical gold. Investors also have the option to surrender their EGRs and take the delivery of the corresponding quantity and quality of gold whenever they want.
The gold eligible for conversion into EGRs must have to meet quality standards which are notified by the London Bullion Market Association and the Bureau of Indian Standards.
Major Benefits of Electronic Gold Receipts
One of the important advantages of the EGRs is convenience. Compare to the physical gold investors do not need to worry about any storage, theft or locker charges.
Since the gold remains set stored in regulated vaults, safety and purity concerns are also significantly reduced.
Another major advantage is liquidity. EGRs can be traded easily on the exchange and making buying and selling more efficient compared to traditional gold ownership.
The system will also allows investment in the smaller denominations and making gold more accessible for retail investors
How EGRs are Different from Gold ETFs
Although both the EGRs and Gold ETFs provide exposure to gold prices but here is a key difference between them.
EGRs are directly represent physical gold stored in vaults whereas the Gold ETFs are units of the mutual fund scheme which invests in gold-related assets.
Another important difference is that EGR holders can also take physical delivery of gold by surrendering the receipts.
In contrast the retail investors in Gold ETFs generally do not receive the physical gold delivery.
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