ValuePickr Forum

Digital gold, yay or nay?

Investing Strategies
#1

Most basic investment books start by breaking down investments into Debt and Equity. Some go further by adding gold to the mix while some go even further by adding real estate.

Gold is considered a safe haven. At times (like the current pandemic), gold have proven its worth as a safe haven. Hence many alternate forms of investments have been designed for investments into gold. Most people prefer to buy physical gold in coins or jewellery form, others buy Sovereign gold bonds. yet, some others have taken the gold mf route. But, recently MMTC-PAMP collabration has started providing digital gold in India. www.mmtcpamp.com

Digital gold model has started in India with a bang. MMTC-PAMP is now partnering with

  1. HDFC
  2. Google pay
  3. Motilal Oswal
  4. phonepe
  5. Paytm
  6. Stockholding corporation of India
  7. fisdom.
    collectively these wallet/ demat providers easily cover 80-90% of the population that is using mobile payments or investment apps.

Investments in gold has been unheard of among the middle class mostly because of the high cost. Even a minimum 100g purchase would require 3-4 lacs depending on the market price. Digital gold aims to solve this by providing small investments starting with re1 on some platforms. Hence, a small time investor can also do an SIP in physical gold where the gold is stored in MMTC-Pamp.

But I have found some cons here.

  1. There is no clarity as to what will happen if the middlemen (the service providers like HDFC, google pay and paytm etc) shut shop?
  2. The prices are very high compared to buying the actual physical gold.

I tried purchasing physical gold on Paytm for sometime. I always used an available discount code which provided 2-3% extra gold. All the purchases were made when gold was in the range of 30-35K. Now with an investment of 10000, I am hardly getting a profit of 1000=1500 upon selling. So, basically Paytm not only charges a high margin on purchase, they also charge for buying back the gold. So the investor hardly makes a profit. On Akshaya Tritiya their prices for gold touched Rs 4990/gram.

Does anybody have a better experience or explanation about paytm gold? Are any other platforms a better investment option? Would you rather buy physical gold from a shop?

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#2

You can buy gold ETF.There are many listed gold etf from mutual fund … AXIS,Birla sun life,ICICI prudential,SBI,HDFC,NIPPON,Kotak etc.
Gold etf rate are directly linked with local rates which keep on changing as market of bullion changes
For physical gold buying you can buy from RSBL.One of biggest coin manufaurer.Even local jewellery shopkeeper will give rsbl or narandas manordas coins where labour charge is very nominal.
(i am in gold business)

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#3

in VP visit THE best Gold ETF for long term-DIGITAL gold

#4

What the numbers speak
Current price in PhonePe
Buy price Rs 48337
Selling price 45237

So the moment you buy from any such platform you lost ~6.5%

Comparing it with today’s IBJA rate
Buy 45780+3%GST = 48069
Sell 45550

Loss just after buying ~ 5.7%

NB: All prices are for 995purity.

I guess the extra 0.8% goes to these platforms.

You need not a safe for your digital gold, but then what difference does these digital gold have from paper gold.
I guess other than their words that it is backed by physical gold, there isn’t any, I don’t believe in their words because I know what happened with NationalSpotExchange, when the companis in highly regulated stock exchanges can easily default.

If you believe in thier words, I guess they are somewhat okayish as you don’t worry about storage.

Disclaimer : Bought from PhonePe

#5

@sham72942 , that’s why it’s alway better to buy sov gold bond. U get bonds issued by RBI that also 999 purity and no gst . Check forum as their is already another thread for gold bonds for more details

#6

If you’re buying gold for long term savings [as opposed to short of medium term trading or for pledging] then it’s better to buy physical and pay 3%.

Gold is a crisis assets and government has all the incentive to pay you a rate less that what you get in the black market in times of crises. Especially if the authority of the govt. doesn’t extend beyond the capital city.

PS: Have my holdings in gold ETFs to pledge and trade.

#7

FYI: I am invested in SGB too.

All gold instruments : Gold futures, EGold, SGB paper, SGB demat, ETF, Gold Mutual Funds, Physical Gold.

If you go by the demand supply funda, buying physical gold is the only process by which you inflate gold price.

ETF trade doesn’t create any new gold demand and it has NIL effect on gold price.

SGB was deviced to decrease the physical gold import and hence it goes against gold demand and corresponding increase in price.

#8

IMHO the utility of gold as being a safe heaven in crisis is lost with both gold ETF’s and SGB’s. The ETF’s and SGB’s are govt controlled and hence beat the actual concept of being a safe heaven.

For somebody wanting to accumulate actual physical gold by SIP, the MMTCPAMP option seems to be the best.

Is there any comparable data for paytm goolepay motilaloswal phone etc to compare the prices and their market share?

#9

One aspect of Digital Gold is that it can quickly change with the decision of a regulator. In case of physical Gold, you own the asset. Digital Gold is susceptible to government policies. If you are in a stable investment climate, Digital Gold might be a good alternative. Otherwise, this might open you to such an uncontrolled risk.

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#10

I have traded Gold in DSP World Gold Fund. Its a Fund of Fund type MF scheme. Invested directly through their portal and sold through their portal. It is a open ended fund. Minimum investment is Rs.500/-. Expense Ratio is 2.5%. Nil exit charges ( I have not calculated and compared, but i sold my units). The reason for selling is it gave me 20% returns at short span. Only disadvantage i have faced is money credited to account after 5 days. The reason i choose to this is unit value is in 2 digits, ornamental gold charges 30% extra. Now a days selling Physical gold has become problematic. While selling/ exchanging also you will loose 30%. Only thing is you can pledge.

I request Mr.Biplob Mondal to conform whether GOLD ETF / SGB can be used as collateral with the Brokers., because iam interested to trade in such mode. Requested to thro some light.

#11

RBI mentions that SGB can be used as collateral for loans
https://m.rbi.org.in//scripts/BS_PressReleaseDisplay.aspx?prid=49665

Expense ratio 2.5% is like paying 1Cr for a Nano car, usually gold funds have expense ratio of 0.1-0.3% since there really isn’t anything much to do for the fund manager, I wonder if they have a fund manager for such thing.

One shouldn’t buy ornamental gold for investment, gold bars and coins are available which has less than a percent for making charge, you sure would need to pay for 3% GST

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#12

You can pledge many gold ETFs for loans as given in this list. For SGBs, you’ve to go to bank and use them as collatera.

#13
[Digital gold](https://www.etmoney.com/mutual-funds/featured/digital-gold-mutual-funds/25) frees you from storage problems and expensive long term costs. Those who trade in digital gold offer facilities to their investors to hold their accumulated gold in secure and safe vaults at a nil or nominal charge
#14

Thank you, Biplob MandalJi

#15

My reasoning for investing in gold is clear. I want that physical product in my hand as a last resort. Sgbs and mfs do not solve that purpose. They are controlled by the govt/ AMC companies defeating the purpose.

Either one doesn’t believe in gold as the ultimate investment tool when zombies attack or investment in gold as the safe heaven doesn’t exist. I consider buying sgbs and gold mfs as still speculation where real gold is not involved.

Problem is it is very expensive and hence, out of reach of the common man.

Just my two cents.

#16

For that you can buy from good retail shop near by you,with nominal labour charges .Here you have to give 3% GST,in case of emergency it can be exchanged against cash anywhere.RSBL is top indian brand 99.5%and 99.9%purity can also bought on line.

#17

In lighter note
When u think SGB are not safe even when they are guaranteed by RBI , And they want pay , then in that situation that worse then who will buy your gold also ? And think what he will pay in exchange of sale of gold as Indian rupees then at that time will be waste paper.
When even in normal case when u hold physical gold and want to sell if price rise , jewellers give u rate much less then prevailing market rates giving excuses that their is no jewellery demand so he will pay less. Or if u want fair price then u have to compulsory buy any jewellery in exchange.

At least SGB or even etf ( my preference is SGB) u. An sell in exchange and get money.

#19

Besides that 2.5% yearly & no need to pay GST, I don’t think anyone should add anything else as positive for SGB.

NB: Collateral is available for both, hence not added specifically for SGB

#20

It is wrong to say physical gold when sold there is loss.In jewellery you have labour charges more but for bullion labour charges are very less.For same one must visit near by jewellery shop (can try two three different shop) than only you will come to know fact

#21

For someone who is keen on understanding how Gold performed vs Fiat currencies -

The article is quite detailed. Makes a strong case for buying gold for risk hedging purposes…

Disc: Not invested in gold, researching about it.

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