How to Invest in digital gold this festive season: 4 instruments one can look at

Traditionally, gold is the most popular investment option for those looking for stable higher returns. Any time of the year, an investor can make a lot of money from gold, if he can time his buying and selling depending on the market prices. In India, the upcoming festive season has been the brightest period to buy gold as the yellow metal is considered to be auspicious. With changing times, many investors now have the option of digital gold instead of gold jewellery and coins. Purchasing gold in the form of gold exchange-traded funds (Gold ETFs), sovereign gold bonds (SGBs), issued by the Reserve Bank of India, and gold mutual funds has been gaining popularity of late.   

Digital Gold 

At present, three companies offer digital gold plans, they are: Augmont Gold, MMTC-PAMP India Pvt. Ltd, and Digital Gold India Pvt. Ltd with its SafeGold brand. Investors can start with small investments of as low as Re 1 and can make payments via investment platforms, such as Paytm, Phonepe, Google Pay, Groww, Jar, Airtel Payments Bank, Amazon Pay, HDFC Securities, Motilal Oswal, and FinPlay. 

Also read: Sovereign Gold Bond scheme opens today: Things you need to know; check price, limit

The first advantage of digital gold is that storage is not a problem. Besides, one doesn’t have to think about verifying the purity of a purchase. One can purchase gold online by paying through digital payment apps and by just creating an account with the seller. After the sale is completed, the seller safeguards the gold for the buyer in a vault.  

Another advantage of buying digital gold is that one can invest a minimum amount to buy digital gold, much like one can invest in a SIP, whereas for physical gold, one has to invest a certain amount in one go to buy ornaments or coins.  

Analysts feel that if someone wants to gift gold, then buying the physical form is always preferable, but if someone wants to invest for the long term, like for their children’s education or marriage, diverting the savings to digital gold can be profitable.
The advantage of buying digital gold over the non-physical form of gold is that digital gold does not attract any cost apart from a one-time levy of 3% GST. Whereas for gold ETFs and gold funds, one has to pay recurring annual charges of around 0.5-1%.   

Gold ETFs 

Gold exchange-traded funds are those that depend on the domestic price of physical gold. Here the investment is in a dematerialised (demat) way, which can be bought and sold on the stock exchange just like shares. In short, we can describe it as a combined way to buy gold and also enjoy the benefits of stock investing, where one gram of gold represents one unit of the Gold ETF.  

Also read: Why it makes sense to invest in digital gold

These ETFs are listed on stock exchanges, and prices can be tracked just like stocks. They can be bought and sold anytime during market hours. 

Sovereign gold bonds 

Sovereign Gold Bonds, or SGBs, are issued by the RBI on behalf of the Indian government as an alternative to physical gold. These bonds are government securities expressed in terms of grams of gold and are issued a couple of times in a given financial year. The scheme was first floated in 2015 by the Indian government. The lock-in period for the scheme is 8 years. 

Transactions are purely book entries and depend on the existing gold prices at the time of buying and selling. It can be held in paper form or in one’s demat account, where transferring the digital asset can be done very easily. One of the added advantages the investor earns an extra interest, which investors buying physical gold cannot have.  

Gold MFs

Gold mutual funds are mutual funds where the underlying asset is gold. Investors should have a Demat account to trade them, where the price of the fund units is ascertained at the end of trading hours, and depend on the Net Asset Value.