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India's domestic economic outlook remains tightly bound to volatile global energy lines, making paper gold instruments a vital hedge for portfolio diversification over the next decade, according to Senior Research Analyst-Commodities at Axis Direct.
Talking to ANI, the senior analyst Deveya Gaglani has warned that the ongoing geopolitical impasse in West Asia continues to weigh heavily on India's macroeconomic sentiment. With international crude benchmarks hovering around USD 100 per barrel due to the conflict between Iran, Israel, and the US, India's foreign exchange reserves are facing rapid depletion. "Unless and until there is a clear resolution and the crude oil prices goes down, I don't see that the Indian market will, Indian economy will perform well," Gaglani stated. "So, I feel that to protect the asset and for diversifying the portfolio, gold ETF and the gold EGR will play a very crucial role in the Indian economy in the coming five to 10 years". Gaglani highlighted that Indian households collectively hold an estimated USD 3 trillion worth of gold, a massive pool of capital that currently sits passively in lockers without generating any yields. To curb expensive physical gold imports, which accounted for over USD 70 billion last year and represent 10% to 11% of India's total import bill, Gaglani urged the government to incentivize investors. "If this gold is like channelized properly into the system by some good incentive schemes... then the Indian gold will be back into the system," he said, suggesting that the reintroduction of the Sovereign Gold Bond (SGB) framework would help stabilize the sharply depreciating rupee. As the Reserve Bank of India steadily diversifies its foreign reserves away from the US dollar and into bullion as a structural inflation hedge, retail consumers are similarly shifting from jewelry toward gold coins. Gaglani strongly endorsed digital and paper gold alternatives to drive this asset transition. "If we talk about the financial products like gold ETF and the EGR, so it will help transform gold from a passive store of wealth into a productive financial asset," Gaglani explained, noting that these instruments solve localized pricing discrepancies by offering a standard market rate. Differentiating between the two instruments, Gaglani pointed out that the Electronic Gold Receipt (EGR) launched by the NSE offers distinct structural benefits over standard Exchange Traded Funds (ETFs). "In gold ETF, it is managed by the fund and it is backed by gold. But in EGR, the difference is that you have a direct ownership of gold," he concluded, adding that EGRs boasts an extended trading window until 11:30 PM and eliminates the burden of expense ratios. (ANI)
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