Gold is glittering & shining nowadays!
Year 2022 saw double digit returns by this precious metal & still counting! Gold futures are now being traded at a fresh high of Rs 56,245 on MCX.
This rally has urged many investors to fall in for this metal. Gold ETF has observed last 3 months returns ending 12th January 2023 at around 10.98%.
Along with Gold ETF, ‘Digital gold’ is also gaining momentum with various platforms offering investment in gold at fingertips.
Last week I met a friend who happily showed me how she is choosing digital gold platforms to invest in gold!
I could sum up her ‘investment experience’ via digital gold in 3 words-
Though it is so, should you invest gold just seeing at the price momentum now?
Should you use ‘digital gold platform’ to invest in gold?
What are the alternatives then?
Let us see in detail-
What is digital gold?
Digital gold is nothing but the ‘gold purchased online, digitally’ . There are some platforms which facilitate invest in gold of 24K purity via online mode.
Here, you can buy gold through their apps or your bank app as well if they have a tie up with them.
Here, you can buy gold in a denomination from 1 gram.
Price of the gold is as per the market rate.
Here you don’t need to physically store the gold, these platforms do the needful.
All such features make this way of investing attractive one.
But, let us understand its features as well-
Buying digital gold can attract different charges too. Like storage charges, etc
- Holding period:
Though such platforms store your gold for you, the period of holding can be limited upto 90 days.
- Physical gold in replacement:
Such platforms allow you to sell your ‘digital gold’ & get the delivery of ‘physical gold’ of equivalent weight with 999 purity.
- Doesn’t come under the purview of SEBI & RBI:
Digital gold platforms don’t come under the compliance, purview of ‘Securities & Exchange board of India’ &
‘The Reserve Bank of India’. These authorities don’t approve & recognize such platforms & way of investing in gold.
They have also banned stock brokers to assist such way of investing in gold.
Looking at the above, YOU SHOULD STAY AWAY FROM PLATFORMS PROVIDING DIGITAL GOLD!
However, there is always a buzz around ‘gold investment’.
Investors should note that, “Returns from gold are not linear. Gold provides returns directly based on their market rate only. Gold doesn’t provide any interest.”
Gold performs better when economy & other markets are bloomy.
It works as ‘hedge’ against portfolio downfall in the other segments of markets.
What you should consider before investing gold?
- Your aim or goal:
Decide ‘why’ of your investment before investing in gold. When you decide on your aim or goal, it becomes easy for you ‘To be specific’ with your investment.
e.g to buy gold to gift your daughter in her wedding after 10 years
- Investment tenure:
Your goal will help you to fix investment tenure of your gold investment.
- Select mode of investment:
As there are offline & online mode, select your mode of investment.
- Decide % of total wealth in gold:
Check weightage of ‘Gold’ in your total portfolio. You should ideally give 10%-15% of total portfolio for Gold.
Note the following while investing in Gold:
- Returns on Gold is directly linked to market rate of gold. This market rate is affected by economical changes, geo-political background.
- If you jump on investing in Gold looking at higher returns, then you may experience volatility in near future.
- To invest in Gold via offline mode, you need to personally visit a shop & buy gold of the equivalent amount as a Bar, coin or jewelry. This in turn need to be stored safely & maintain its safety throughout. While selling, you face a ‘cut in the price’.
- On the other hand, when you invest in gold via ‘Online’ mode, you can choose to invest via ‘Sovereign gold bonds, Gold ETF or Gold mutual funds. Here, you can invest via your Demat a/c & these are legitimate ways of investing in gold via online mode.
- Each of the above option has its own unique features.
Gold though glitters, we must be thoughtful while investing in it so that we can make the best possible returns out of it!