After SEBI warning, should you prefer physical gold & gold ETF over digital gold?

India’s gold demand has witnessed a remarkable upswing this year, even as market regulators and SEBI caution investors against unregulated digital gold platforms.

According to industry experts, the surge reflects strong investor optimism and changing preferences among young, tech-savvy consumers who are exploring new-age gold investment avenues.

Gold Demand Soars: 44% rise in volume, 134% in value

In conversation with Zee Business Commodity Editor Mrityunjay Kumar Jha, Arti Saxena, Head of Marketing India, World Gold Council (WGC), said India’s gold demand has seen a sharp increase, with AU holdings rising to 83.5 tonnes from 58 tonnes a year ago — representing a 44 per cent surge in volume terms and a 134 per cent spike in value terms.

“The biggest reason behind investor optimism is that Gold ETFs offer benefits matching the digital-first lifestyle of young consumers,” she noted, adding that “digital gold has emerged as an effective and convenient investment option.”

SEBI advisory key takeaways

• Investors should invest only through regulated instruments such as Gold ETFs, commodity derivatives, or Electronic Gold Receipts (EGRs)
• Many online platforms are selling gold without any regulatory oversight
• Digital gold is neither registered with SEBI nor falls under any formal legal framework
• SEBI reiterated that gold investments must be made only through registered and regulated entities

What is digital gold?

Digital gold provides a pathway whereby the investors can purchase, keep and sell gold via the Internet, usually claiming to provide storage in e-wallets for storage and the possibility of transforming the possession into tangible gold at any moment.

Simply, it refers to the online investment in gold process through the use of applications or website, it lets you purchase or own small amounts of the metal that the provider maintains in a safe vault for you.

The ownership is then recorded digitally and you can either sell it back or ask for the physical gold to be delivered to you later, but it should be noted that some of these products are not under regulation and may lack investor protections.

Expert Caution: Regulation is key

In conversation with Zee Business Commodity Editor Mrityunjay Kumar Jha, Harshvardhan Roongta, CFP, Roongta Securities, explained that digital gold does not come under SEBI’s regulatory purview.

“If any issue arises, SEBI cannot intervene, since digital gold is an unregulated investment avenue,” Roongta said.

He added, “When an industry is unregulated, it’s best to avoid investing. There are several other regulated gold investment options available.”

While digital gold offers the convenience of digital storage and physical conversion, Roongta cautioned that “whenever money is involved, regulation is essential to prevent fraud or scams.”

He further emphasized that until digital gold comes under RBI or SEBI supervision, it remains a risky choice for investors.

Digital gold industry welcomes regulation

Chirag Thakkar, Founder, DigiGold, told Zee Business that in the last three months, 60–70 per cent of digital gold buyers have opted for physical delivery of their holdings.

“If SEBI decides to regulate the digital gold sector, the industry would welcome it positively,” Thakkar said.

He added that consumers can already approach consumer courts in case of fraud, and that “the industry is ready to comply with any future regulatory framework.”

Digital gold transactions surges 10x

Renisha Chainani, Head of Research, Augmont Gold, highlighted that the digital gold market has expanded significantly in recent years, drawing SEBI’s attention.

Citing NPCI data, she said digital gold transactions have risen from 21 million to nearly 1 billion in just 1.5 years, and now make up around 10 per cent of the total gold investment market.

“Although not yet regulated by SEBI or RBI, the market is currently self-regulated,” she said.

Chainani added that the industry, now eight years old, has gained strong consumer trust, and “within the next 1–2 years, digital gold is likely to come under formal regulation.”

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Key drawbacks of digital gold

The Securities and Exchange Board of India (SEBI) recently issued a public advisory warning investors against buying digital gold through unregulated online platforms.

Here are some drawbacks of using digital gold:

• Purchase limit: Most platforms cap purchases at around Rs 2 lakh
• Higher charges: Making and delivery fees are typically higher than traditional gold purchases
• Limited storage: Free storage is available only for a short duration on several platforms
• It is unregulated