Dhanteras 2024: Physical or digital gold – What should you choose this festive season? | Mint

Are you planning to invest in gold this Dhanteras. It is quite likely for you to be staring at a conundrum i.e., whether to choose physical or digital gold for the purpose of investing. Both the forms of gold have their own advantages and disadvantages, however, one key factor which may swing the decision in favour of digital gold is the upside it offers in the overall earnings.

Physical gold entails making cost and even triggers worries over safety. Digital gold, on the contrary, gives the return minus worries.

Gold prices amount to ₹7,996 per gram for 24 karat and ₹7,331 per gram for 22-karat gold as on Oct 29, 2024. Check this for more details.

The key differences between physical and virtual gold are listed below. Let us know more about them.

Virtual gold or physical gold: What to choose?

1. Making cost & GST: There could be making charge of 10 to 25 percent of total price when you intend to buy physical gold. Suppose, you pay 15 percent of making charges, then buying a jewllery of ₹2 lakh will make you loosen your pursestrings by ₹30,000 (15 percent of ₹2 lakh). 

At the time of buying gold ETFs or Gold mutual funds, you don’t have to bear any such charges. So, the scope of earning money are obviously higher.

“It is better to buy gold ETFs since you don’t have to pay the making charges (around 10 percent) and GST (3 per cent). Another advantage of buying digital gold is that you can buy even for ₹1,000, an option not available in case of hard jewellery,” says Sridharan S., a Sebi-registered investment advisor and founder of Wealth Ladder Direct.

2. Higher earning: Thanks to the lower expense incurred at the time of buying, digital gold offers a greater scope to earn gains. It is vital to note that digital investment in gold primarily entails gold mutual funds and gold ETFs. Gold bonds, on the other hand, have not become too successful. No wonder then the government is contemplating discontinuing them.

3. Demat account: To be able to invest in a gold ETF, investor needs to have a demat account. On the other hand, there is no requirement of demat account to be able to invest in the precious metal in its physical form.

Also, when you invest in gold mutual funds, the returns may be slightly lower than the actual returns on this precious metal because of the tracking error.

4. Safety: Keeping physical jewellery safe in a bank locker usally requires a small recurring expense towards the locker. On the top of it, one has to bear the risk of losing it. To insure it against any such risk, one can take an insurance, which again adds to the overall expense towards maintaining of jewellery.

On the other hand, digital gold does not entail any such expense arising out of safety concerns.

5. Using as jewellery: Last but certainly not the least, digital gold may be better in form of investment, but you certainly can’t wear it around your neck when you happen to attend a wedding. 

So, it can’t compensate for a real jewellery. “Physical form of jewellery should be seen as consumption and not as investment alone. Digital gold, on the contrary, is purely an investment,” adds Sridharan.