The National Stock Exchange of India () last month launched Electronic Gold Receipts (EGRs) as a new segment, in a bid to create a more transparent and efficient price discovery of the yellow metal.
The move is expected to bridge the age-old gap between physical gold and the financial markets by offering a regulated, secure, and technologically-advanced platform for trading in the precious commodity, the exchange said in a statement.
Shri Sriram Krishnan, Chief Business Development Officer (CBDO), NSE, said: “The introduction of EGRs at NSE marks a pivotal evolution in how India interacts with its most cherished asset.”
Here’s a look at what are EGR, what are its benefits and since we already have ETF – which is also a digital format – how are these two different?
What is NSE EGR?
Electronic Gold Receipts (EGRs) are digital certificates that show you own a certain amount of physical gold. The is safely stored in Sebi-approved vaults, while your ownership is held electronically in a demat account. Each EGR is backed by actual gold and can be bought or sold on a stock exchange, making gold trading easier and more transparent.
“With this launch, NSE aims to create a robust and transparent ecosystem for gold trading, enabling efficient price discovery, improved market participation, and enhanced trust across stakeholders, including jewellers, refiners, traders, and institutional investors,” the exchange said.
NSE also witnessed a successful dematerialisation of a gold bar (1,000 grams) into an Electronic Gold Receipt, symbolising the seamless conversion of physical gold into a tradable electronic instrument .
What are benefits of EGR?
By facilitating electronic holding, and seamless convertibility between physical and digital formats, EGRs empower investors to participate in the gold market even in smaller denominations.
- EGRs offer a secure and hassle-free way to invest in gold by removing concerns related to theft, loss, or storage expenses such as bank locker charges.
- Investors also need not worry about the purity of the metal, as only gold meeting the standards set by the London Bullion Market Association (LBMA) and the Bureau of Indian Standards (BIS) can be converted into EGRs.
- EGRs can be traded in small units, which means it can become a new instrument for retail investor to diversify one’s portfolio.
What is the difference between EGR and ETF?
- An EGR is backed by actual physical gold stored in a secure vault, whereas a represents units of a fund that invests in gold. This means EGRs are more directly linked to physical gold.
- Another advantage is that EGR holders can generally convert their receipts into physical gold more easily, while retail investors in Gold ETFs usually cannot take direct delivery of the metal.