Buying that chocolate gold coin and real gold is not so different anymore, thanks to digital gold. In fact, you can buy digital gold before you can even finish off that chocolate piece.
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The process to purchase digital gold is extremely simple and people can start investing with just Re 1 instead of saving a huge sum as in the case of physical gold. While buying gold jewellery or coins is an age-old tradition in India, especially during the Diwali festival, investing in digital gold is like a millennial twist to the practice.
Batting for digital gold, Sugandha Sachdeva, vice president of commodity and currency research at Religare Broking Limited, said, if consumption is not the objective, then digital avenues are the preferred modes for gaining exposure to gold for investment purposes.
“Digital gold instruments could be the right choice for those who want to make an investment in gold without any hassle or worry about quality, storage, safety or the large sum of money to invest. Besides, one is assured of transparent pricing and the ease of transactions through the online mode,” he told CNBCTV18.com.
He highlighted that with a minimum investment of as low as Re 1 , one can accumulate gold over time.
Digital gold not only saves people a visit to the crowded jewellery store during the festive season to select designs under a set budget, but it also frees them of the stress about the physical gold’s safety in the home locker. People can buy, sell and gift digital gold in just a few clicks and their purchase remains safe in the digital platform’s vaults. Digital gold can also be converted into physical gold and delivered to people’s residences.
People can invest in gold either through gold bonds, gold ETFs, gold derivative contracts, fold mutual funds, or digital gold. According to Sachdeva, be it in any form, there must be at least 10-15 percent of gold in one’s portfolio.
However, as more investors, especially young ones, set their sights on digital gold, the absence of regulations has experts’ eyebrows raised.
NS Ramaswamy, the head of commodities at Ventura Securities, refused to advocate buying digital gold as it doesn't come under a regulatory framework. He also red-flagged the additional spread cost, storage and insurance cost that digital gold entails. “Hence, it is not a viable option when compared to an ETF (exchange traded funds) or a gold fund through mutual funds,” he said.
Meanwhile, Rahul Agarwal, director at Wealth Discovery Private Limited, acknowledged digital gold as the new fad that appeals to millennials as they learn to walk their parents’ footsteps. While digital gold checks the ease of online buying and storage in insured vaults boxes, Agarwal said it also overcomes the issues associated with physical gold purchases like safekeeping and minimum investment value. However, one still has to pay a 3 percent goods and services (GST) tax on the purchase, just like physical gold.
Despite the extremely easy process, the Wealth Discovery director noted that digital gold is not devoid of disadvantages. There is no official government-run regulating body such as the Reserve Bank of India (RBI) or Securities and Exchange Board of India (SEBI) to keep a watch on digital gold transactions, he said.
He also pointed out that delivery and making charges are further applied to the price of gold and in a few cases, companies only offer a limited storage period, after which one either has to take physical delivery or sell the gold.
According to Agarwal, if one has a slightly longer-term perspective on gold, sovereign gold bonds is a great option as it provides the benefit of virtually zero credit risk, capital gains tax shield, additional interest to hold the bond, no making or delivery charges and the facility of holding the bonds in demat form and trading them on the exchange if the need arises.
Though Ravindra Rao, CMT, EPAT, VP- head commodity research at Kotak Securities, stressed that digital gold is a better option for investment compared to physical gold, he agreed to its disadvantages as well.
He also said that the most important point is that digital gold is still not regulated. “Second, the buy and sell spreads might be higher which might add to the cost. Also digital gold will save your making charges but you need to pay 3 percent GST. So, from an investment point of view, gold ETF and gold mutual funds surely have an edge over digital gold. Moreover, if the horizon is long, say 5-10 year sovereign gold bonds is one of the best options,” he explained.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
(Edited by : Anshul)
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