Is it the right time to buy gold? MMTC-PAMP CEO reveals

MMTC-PAMP, a joint venture between Switzerland-based bullion brand, PAMP SA, and MMTC Ltd, a Government of India undertaking, is one of Asia's largest refineries, importing gold and silver ore from over 20 mines globally. Vikas Singh, MD and CEO of MMTC-PAMP in conversation with Business Today talks about the comprehensive bouquet of physical and digital gold it offers to consumers. 

BT: What is the role of MMTC PAMP in the digital gold ecosystem?

Vikas Singh: We are the pioneers of digital gold in the country. We were the first to launch and we are also the biggest. We also do not compare ourselves with any of the other solutions in the market. This is because first and foremost, MMTC-PAMP, stands for the highest levels of trust in purity, as it's not just the 26 per cent of MMTC but also the LBMA accreditation, which is the highest standard of governance and credit ratings. The second piece is that everything we do is in-house, we don't outsource anything. Most of the people are subcontracting parts of this value chain to different people. In MMTC-PAMP, we have our own refinery. Globally, we have got two refineries, one in Switzerland and one in India, both with the highest levels of accreditation.

Our entire communication with the customer is that not only are you getting the purest goal, but we are also the only ones with a four-nine purity which basically means 99.99 per cent. You know the world outside is lesser, some of them claim more and offer even lesser. So, it's not only the purity, which is the highest, but also the safety which is the highest.

Moreover, we are fully insured so that if, God forbid, something happens everything is completely secured. We also have a trustee. And so again from an audit point of view, we maintain all the hygiene that is required for accounting and middle management. We will keep building on these credentials. 

BT: Gold is traditionally considered a hedge against inflation. But currently, its prices are down despite high inflation. What’s the reason?

Vikas Singh: There are two things. In the last two years with COVID-19, all management theories have gone out of the window. See, the fact of the matter is, you've had huge quantitative easing that has happened in the last two and a half years to boost up the global economy. I don't think anyone could have ever imagined the inflation rates in the US and UK. And the Fed and other central banks have progressively across the world been taking up interest rates. And for that reason, there has been a capital movement from traditional investments or traditional markets, to these markets. It is really a function of larger market movements. It is not a function of sentiments. So I would just say that for categories like precious metals, gold and silver, it is always good to try and see it over a long-term horizon because this is not something that you trade with.

Gold is an asset type that you buy and keep, and especially in the Indian context people typically sell on a milestone moment like when you want to buy a house, it's the marriage and the family education and stuff like that. So it's typically used for that or unfortunately, it is used as a distress sale. Till like what happened during COVID-19 time when people lost jobs and they needed to bring some money back in. So I think gold should be seen over a medium time horizon and not on a kind of daily, monthly, or weekly kind of movement.

BT: What is the cheapest way of buying gold?

Vikas Singh: Typically, our costing is very simple. It is whatever the price of gold is and we refresh our price of gold every two minutes. So whatever is the published price of gold by the London Metal Exchange, and whatever the customs duty is, is applicable. And the foreign exchange rate because we import gold, so therefore there's a conversion rate. So it's real-time and then there is the markup on GST, and there is a platform charge of 2.9 per cent. But if you were to buy traditional jewellery, then you know, besides a 3 per cent GST you would also have a 10-25 per cent making charge. 

BT: SEBI recently banned stockbrokers from buying and selling digital gold. What are the platforms available for buying digital gold now?

Vikas Singh: The SEBI circular said that if you are registered under the Securities Contract Act then you are not allowed to participate in a product, which is not regulated by SEBI. So anything that they do should logically be endorsed by SEBI. So, for that reason, some of the banks etc, had to move out, but the entire NBFC ecosystem, e-commerce, payments gateway ecosystem, etc, are available to you to invest in digital gold. But all said and done, we are engaging, and it's a strong recommendation from our side to the government, that there should be a designated regulator from the safety point of view so that no fly-by-night operator takes advantage of a situation.

BT: Is your digital gold backed by physical gold?

Vikas Singh: We have a huge vault in place, and we store our own gold. So whenever a customer comes and buys either through a partner or directly on our portal, to the extent that the purchase happens, we shift a physical quantity of gold against that name in our vault, so nothing is outsourced. And that is audited on a daily basis. At the end of the day, we do a sum total of buy and sell and then we either shift more gold, or we maybe pull some gold out. What we also do is that we put an extra quantum of gold in that amount that is being stored. So that's almost like a safety buffer that stays there.

BT: There are new ways to invest in digital gold. For example, there are companies buying and selling digital gold, which is stored in off-shore locations. How reliable is the arrangement?

Vikas Singh: There are a couple of these enterprises which are offering for you to invest in offshore locations, but you pay in forex, and they hold the metal for you in an offshore location. I wouldn't comment on that. Because I think the first question you'd want to ask yourself is safety. Then you need to see the credentials of the person who's possibly making that offer. Is it trustworthy really? So there is no reason for you to not be looking at the Indian markets and looking beyond because anything beyond I'd be extra careful and extra cautious.

BT: What are some of the things a buyer must be aware of while buying digital gold?

Vikas Singh: You need to be mindful of who you're engaging with. So purity and flexibility are extremely important. One thing about digital gold is that there are no transaction charges and there are no making charges and you can buy and sell anytime you like. There's a 3 per cent GST component which is applicable, which is applicable for any jewellery purchase that you make. Gen Z and Millennials not blocking capital in assets that can be illiquid is something which is good. And digital gold is one smart way for you to engage in gold.

BT: Is GST also levied on gold funds and ETFs?

Vikas Singh: In the case of mutual funds typically it is called an STT or Securities Transaction Tax. So the numbers vary. In every segment, there is an element of tax, which is levied. In our segment, it is called GST.

BT: How has the festive season been so far for you?

Vikas Singh: The season has started very well. We've sharpened the portfolio further and there's a lot that's happening on the MMTC PAMP front. Volumes are going very well.

BT: Is it a good time to buy gold?

Vikas Singh: We don't comment on what the potential price movement will be, for obvious reasons. But I think it's always a good time to buy. So, in a way the festive season has started, the wedding season has started, gold has actually come down from a high and the demand buoyancy is good for the sector. So I think it's a good time to look at it.

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