Investors Find Digital Gold More Favourable Than Physical Gold Ahead of Diwali

New Delhi, 4th November 2023: As the festive season of 2023 commences, the opportunity to invest in both physical and digital gold is now a viable choice for many. With Diwali fast approaching, the tradition of purchasing gold on Dhanteras is a customary practice. While some prefer buying physical gold, others are opting for digital gold, leading to a dilemma between Gold ETFs and Sovereign Gold Bonds (SGB). Understanding the advantages between these two gold investment options is key to making an informed choice.

The introduction of Gold ETFs dates to 2007, gaining significant traction, especially during the COVID-19 era. By January 2020, the number of investors in ETFs had soared to 4.61 lakhs. On the other hand, Sovereign Gold Bonds are issued by the government, providing returns based on gold prices over time. For long-term investments, both ETFs and SGBs prove to be beneficial.

The advent of digital gold has caused a slight decline in the purchase of physical gold. The reasoning behind this shift is the additional cost involved in maintaining physical gold, along with the perennial concern of theft or loss. To keep physical gold secure, one must incur additional expenses. Consequently, confusion arises among many about whether to invest in ETFs or SGBs and the differences between the two.
When comparing ETFs with SGBs, investing in SGBs yields higher returns. SGBs offer an annual interest rate of 2.5%. Moreover, there’s no need to pay any taxes if the bond is held until maturity. Notably, SGBs cannot be converted into physical gold. Investors can lock in their investment in SGBs for up to 8 years, with tax benefits available after a 5-year investment period.

For individuals without a Demat Account, investing in either of these options is not feasible. Additionally, investing in Gold ETFs is also possible through Gold Fund of Funds. There’s no limit to investing in Gold ETFs, making it a favourable option for those looking at long-term investments.

As the Diwali fervour builds and the tradition of investing in gold continues, comprehending the distinctions between physical and digital gold investments remains crucial for prospective investors. Making an informed choice between Gold ETFs and Sovereign Gold Bonds depends on individual financial goals and the duration of the investment.