Wealth Guide: Physical Gold vs Digital Gold - Which is the Smarter Investment? Expert's answer

Gold has been the go-to investment option for Indians over centuries. With the various new digital options such as Sovereign gold bonds and Gold ETFs and the background of India's affection for gold, it becomes important to consider all factors in determining the better investment option. Mahendra Luniya, CEO, Vighnaharta Gold Limited shares on knowledge on gold as an investment option and Physical Gold vs Digital Gold: Which is the ‘Smarter Investment’? Expert's answer:-

Mahendra Luniya says, "The digital options come with advantages such as:

1. Interest: SGBs provide a lucrative 2.5% pa interest over and above the returns from physical gold investments.

2. No GST: Indirect taxes do not come into the picture when we buy digital products as gold acts as an underlying for these securities and securities do not attract GST. Thus, we directly save 3% of the amount, which would otherwise add up to the costs of investments.

3. Easy buying & selling: Digital products can be bought via de-mat accounts and this makes anytime buying and selling easy.

4. No doubts about purity: Physical gold purchases need the buyer to analyse the product being purchased well to check whether the quality is reliable, but with the digital ones', this doubt never arises."

Further, he adds, "Having considered the advantages of the digital products, let's consider what does the physical product offer that the digital one doesn't:

1. Ornamental use: Over the years, gold hasn't just been an investment product, but has rooted itself as an auspicious ornamental utility commodity. Women in India want to buy gold jewellery not just as an investment but as a way of adding stars to their attire. This function can never be accomplished by digital gold investments.

2. Safer option: Older generations in India still find themselves distanced from the modern technology available to them and this discomfort makes them choose options that they understand better than the ones where they cannot even feel the product. The sense of ownership and safety that physical gold provides is not very easy to replace."

"To conclude, we've understood that the advantages of digital options logically are better and outnumber the physical ones. Shifting from physical products can take time, but that's the way forward. A step towards that would be to segregate the ornamental usage from the investment product, just as people have now started understanding that insurance and investments should ideally be seen separate in order to draw the best benefits out of the both. Digital products thus are not just the smarter investment options, but also the option that could reduce our current account deficits and help the country's financial growth," he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)