Updated on: Wednesday, October 27, 2021, 04:34 PM IST

Teji Mandi Explains: Digital gold or sovereign gold bond--which one is better this season?

Representational image | Photo: Pexels

Representational image | Photo: Pexels


To many, the stock market is an alien subject. For most people, gold and fixed deposits remain the best investment options. In fact, India’s consumption of gold is so massive that during January-March this year, it increased by 37% to 140 tonnes as compared to last year. Digital gold replaced physical gold during COVID-19 and garnered widespread popularity. This proves that despite any crisis in India, gold continues to be the most reliable investment option to date.

Digital Gold Hype

A decade back, digital gold didn’t exist in the market and today, it is the flavour of the season. After fintech companies, traditional jewellers like Tanishq and Kalyan Jewellers are also planning to enter the digital gold space. So, what is it?

Digital gold is a tool that allows you to buy and sell pure gold in digital form at current market values. It isn't a deposit or a financial product. The gold you purchase is backed by actual gold and housed in a certified depository in your name. You may then exchange your digital gold for coins, bars, and jewellery at any moment and have it delivered to you. All you have to do now is pay making charges. Digital gold seems to be much handier for the high-tech generation for its sheer security and no-storage hassle, and hence the hype.

What’s Sovereign Gold Bond Then?

SGBs are issued by the RBI at a discount to the current market price for a holding period of eight years. But there is a catch. SGBs cannot be cashed immediately. It’s not as liquid as digital gold. However, it comes with two big benefits - 2.5% interest/annum and tax-free status. Since it’s a low-risk investment, investing in these bonds is considered to be safe because it’s a regulated product and gold prices are always expected to go up in the long term. Passive investors who are not willing to take risks opt for SGBs.

Which One Is Better For This Season?

Gold is the most desired asset that holds emotional and social value. If you are looking at it from an investment perspective, then digital gold is a good option, for the short term. If one wants to own it and make profits in the long term, then SGBs is the one for you. Depending on the time horizon, need and risk appetite, one can choose either of the gold assets. The important point to note here is to hold it because it diversifies your portfolio. Since it also acts as a hedge against inflation and is a stable investment option, it gives us higher profits.

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Published on: Wednesday, October 27, 2021, 04:34 PM IST