Physical or digital gold? 5 key factors to help you make right investment choice

You may have often observed—especially during the festive and wedding seasons—that women traditionally adorn themselves with gold and silver jewellery for special occasions, while men too often wear gold chains or bracelets. Beyond their ornamental value, these precious metals have long been regarded as 'safe-haven assets', offering security and consistent long-term returns.

However, with technological growth and digital innovation in full swing, the gradual shift of physical gold assets to digital forms has opened new avenues for investors.

While digital gold remains unregulated, many investors continue to see it as a convenient and accessible investment option. In case you are contemplating whether physical or digital gold makes a better form of investment in the precious metal, here are insights on the subject to guide you on your journey.

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Physical gold vs digital gold

SEBI’s stance: Invest through regulated platforms

The Securities and Exchange Board of India (SEBI) has advised investors to invest in gold only through regulated platforms, such as gold ETFs (Exchange Traded Funds) or Sovereign Gold Bonds (SGBs).

Currently, digital gold does not fall under SEBI or RBI regulations, which means investors have limited legal protection should they face any hiccups.

Digital gold’s growing popularity

According to Renisha Chainani, Head of Research, Augmont Gold, the digital gold market has seen remarkable growth in recent years, catching regulatory attention. “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,” said Chainani, citing NPCI data.

She added that although the market is currently self-regulated, it has built significant consumer trust over the past eight years.

“Within the next 1–2 years, digital gold is likely to come under formal regulation,” she noted.

Physical gold offers security and redressal

While digital gold offers convenience, experts highlight that physical gold provides clearer legal recourse in case of fraud, theft, or dispute.

According to Harshwardhan Roongta, CFP, Roongta Securities, “Digital gold neither comes under SEBI nor under any legal supervision. If any issue arises, you cannot approach SEBI. There’s no clarity on whether it’s fake or authentic.”

He added, “If you buy physical gold and face any fraud or theft, you can file a police complaint or approach BIS against the jeweller. Legal action is possible in such cases.”

Consumer protection in digital gold

On the other hand, Chirag Thakkar, Founder, DigiGold, pointed out that many digital gold investors choose to convert their holdings into physical delivery over time.

“In the last three years, around 60–70 per cent of people who bought digital gold have opted for physical gold delivery,” he said.

He also emphasised that consumer protection exists, even for digital gold.

“If any investor faces issues, they can file a complaint with the Consumer Affairs Department, and necessary action is taken,” Thakkar added.

Convenience vs. regulation

While digital gold scores high on accessibility, ease of transaction, and flexibility in small denominations, physical gold remains the more trusted and regulated form of investment.

Digital gold is available through mobile apps.

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

Drawbacks of physical gold

Security Concerns: Buying physical gold comes with the constant risk of theft or loss. Whether stored at home or in a bank locker, ensuring its safety often involves additional expenses such as locker rent or insurance.

Purity concern: Hallmarked jewellery is quite common, but there are some instances of impurity or adulteration that do take place. Without proper certification or trusted sources, buyers may end up with gold of lower purity than claimed, that affects its resale value.

Lower Returns on Jewellery: Gold coins and bars tend to offer better returns since they are pure and easier to sell. Jewellery involves making charges and wastage costs that are non-recoverable during resale. In results, the actual returns from gold jewellery are often significantly lower compared to the buying price.

Storage and Maintenance Costs: Physical gold requires safekeeping, which may involve bank lockers or home safes that demands maintenance or security costs, adding to the total investment.

Liquidity Issues: While gold is generally considered liquid, selling physical gold quickly, especially jewellery may not always fetch the best market price. Buyers or jewellers often deduct making charges and offer a lower resale rate.

Risk of Fraud: In a conversation with Zee Business, IBJA Spokesperson Surendra Mehta advised buyers that there are instances where the imitation or gold-plated merchandise is put forward as pure gold. Investors can unwittingly become a prey to fraud without the process of testing or certification.

Drawbacks of having digital gold

SEBI has come out with a public advisory that cautions investors about acquiring digital gold from the unregulated online platforms.

Here are some factors to consider before buying 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.

Regulation: Since it does not come under SEBI or RBI regulation, investors cannot approach these regulators for redressal in case of fraud, mismanagement, or disputes with the service provider.