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5 Things to Remember before buying Digital Gold

March 29, 2022 / 01:14 PM IST

Digital gold is physical gold bought online (digitally) and stored in a secured vault on customer’s behalf.. It's easily available over an increasing number of digital platforms, and provides risk-averse millennial and young investors the perfect means to park their money in a versatile and liquid gold investment.

Digital gold has lived up to its promise and contributed to the resurgence of gold as a strategic investment asset. But to draw on its myriad advantages, here are 5 things any investor should remember before investing in digital gold.

1. Get a quality assurance

As part of due diligence before buying digital gold, a buyer should confirm the quality of physical gold underpinning their investment. Most digital gold providers own 24K gold exclusively, which is certified independently to ensure the highest purity.

2. Get a Tax invoice

One of the great qualities of digital gold is its availability across a number of online platforms. However, it's important to remember that these platforms like PhonePe, PayTM, Amazon etc. are not sellers of digital gold, but mere conduits between the seller and buyer. In India, digital gold is currently sold by SafeGold, MMTC-PAMP India , Augmont etc.  Customer’s buy/ sell transactions are reflected in their digital gold account and the Seller sends a valid Tax Invoices by email to the buyer or make it available for download in their digital gold account.

3. There is no limit to how much digital gold you can buy

Investors can buy as little as Re.1 worth of digital gold. But equally notable is the fact that there are no firmly established upper limits either. Although, digital gold platforms may have additional know your customer (KYC) requirements for purchases above Rs. 1.5 lakhs to Rs.2 lakhs, similar to gold purchases from any offline stores/ jewellers. .

4. Know the spread (i.e. Buying and Selling Price)

A common practice for gold or such trade is to charge a higher price to buyers of gold, than the price offered to sellers. The difference in the buying and selling price is known as the 'spread'. This spread is normally 2 to 3% for digital gold as it covers the bank/ credit card payment charges of 1% to 2 %. The 3% GST levied on gold is lost when customers sell back their gold as GST is not recoverable by end customers but only VAT registered businesses..

5. Lack of a central digital gold authority

In spite of its rapid growth, the digital gold industry lacks a regulatory authority. This places the onus on digital gold buyers to do their own due diligence, before investing in digital gold. So far, SEBI has only stepped in to bar stock brokers from selling digital gold. More structural guidelines are awaited.

However, for any new investor in digital gold, being mindful of these 5 points will be enough to embark on a fruitful investment journey. Besides, of course, staying tuned for all the latest developments from the world of digital gold, as and when they happen.


Moneycontrol journalists were not involved in the creation of the article

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first published: Mar 29, 2022 01:10 pm
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