Companies selling digital gold try all means to convince you about the merits of these so-called assets. Ahead of Dhanteras and Diwali, you will come across several online and offline campaigns trying to lure you into investing in Digital Gold. But you should exercise caution. Investing in Digital Gold may not be safe and profitable in the long run.
Here are 5 reasons to avoid Digital Gold buying in this festival season. These are the facts that digital gold salespersons often try to hide or obfuscate.
Not regularised, not safe
Digital Gold investment is not regularised in India. Last year, the markets regulator Securities and Exchange Board of India (SEBI) barred investment advisors and brokers from dealing in digital gold.
One of the basic rules of personal finance to keep your money safe is that you should never invest in assets that are not regularized. Therefore, until the digital gold segment gets properly recognised and regularised, smart investors should stay away from it.
Extra cost for converting into jewellery
Some jewellers allow customers to convert their digital gold holdings into real jewellery when required. However, the prices do not match gram-to-gram. Digital gold rates are always lower than jewellery rates.
Moreover, when going for an exchange, customers have to pay extra costs in terms of taxes and making charges. GST is levied twice – first when the digital gold is sold to the customer and once again on the final value of finished jewellery.
You can’t check whether the gold is actually held in a vault
Sellers promise that each gram of digital gold sold online is backed by real gold kept in a secured vault. However, customers can’t go and check if their gold is actually stored.
There will always be the risk of losing some digital gold if the refiner goes bankrupt.
No interest on your deposits
Some digital gold sellers allow customers to accumulate digital gold by depositing very small amounts over a period of time. However, customers do not earn any interest on such deposits. The only return Digital Gold buyers may expect is if the gold price goes up in the market. The final income from digital gold is also affected by tax implications and selling charges. In case of enquiries by government authorities, digital gold sellers will have to provide the requested information.
No free storage forever
Sellers claim they store physical gold equivalent to the digital gold purchased by customers within insured and certified vaults at highly secure premises. However, this storage facility is not free forever.
Generally, free storage is provided for five years. After that, a fee will be charged on a monthly basis for the next 5 years.
What are the better options?
Customers interested in investing in gold digitally may opt for Sovereign Gold Bonds (SGBs) as the best option. SGBs are directly offered by the RBI and offer annual interest in addition to gains from Gold price appreciation. Customers may also explore Gold ETFs for market-linked returns.