For many people, digital gold has become a new way of investing in gold. In the Corona era, people are hesitating to go to jewelery stores and gold dealers, so shopping for gold online is the perfect solution. Digital gold can be purchased online and is stored in the insured vaults by the seller on behalf of the customer. All you need is the internet and mobile banking. With this, you can invest in gold online from anywhere, anytime. Many mobile e-wallets like Paytm, Google Pay, and PhonePe can also be invested in Digital Gold. Brokers like HDFC Securities and Motilal Oswal also have the option to invest in digital gold. Despite such features, there are some things that need to be considered before investing in Digital Gold.
There is no regulator
The biggest risk of investing in digital gold is that there is no regulator for it. When you buy digital gold, the manufacturer buys gold equal to the amount in your name. This gold is deposited in the vault of a third party or vendor. Usually, a trustee is appointed to see that the volume and purity are maintained according to the gold purchased by the investor. But there is no regulator to see if the trustee is working properly. Whereas in the case of Gold ETFs there is the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) is the regulator for Gold Bonds.
GST increases cost
When you buy digital gold, you will have to pay 3 percent GST, just like physical gold.
Holding charges
If you are buying gold from Goldlane using PhonePe, you may have to pay storage charges. There will be no charge for the first two years. If the amount of gold is less than 2 grams at the end of two years from the date of your purchase, 0.05 percent is charged per month. There is no charge for purchasing digital gold from MMTC-PAMP.
Charge for delivery and jewelry making
One of the advantages of digital gold is that you get the option to take physical delivery in it. But you may have to pay delivery charges. Similarly, if you are converting your digital gold investment into physical gold, then you will have to pay a fee for it. Investors can convert digital gold into gold bars or coins.
Investment time limit
Generally, the maximum holding period for digital gold products is fixed. After this, the investor has to take delivery of gold or sell it back. For example, you must mandatorily take delivery of gold purchased from MMTC-PAMP or sell it. If the delivery is not taken, after five years, the investor will have to pay the additional fee fixed by MMTC-PAMP. Similarly, if you are buying gold from Goldlane using PhonePe, the gold can be kept for a maximum period of 7 years only. But there is no such rule in Gold ETFs.
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