Want to buy physical gold? Pick a digital platform for your investment

Those keen on buying gold as investment will be better off with sovereign gold bonds or ETFs

What can you get for a few rupees? Some sugar candies, perhaps. But do you know that you can also buy gold for a few rupees? Amazon Pay recently started allowing users to purchase digital gold on its platform. While existing players like Paytm, MobiKwik, and PhonePe allow you to buy gold for Rs 1, Amazon Pay has kept the minimum amount at Rs 5.

Digital gold is essentially an avenue for investing in physical gold. Says Terence Lucien, head of mutual funds and gold, PhonePe: “While the purchase is done digitally, our partners actually hold 24-carat pure physical gold for every purchase made by a customer.”

These platforms have made it easy for customers to start accumulating gold by investing small amounts. They also take care of purity-related concerns.

Says Kunal Bajaj, head of strategy & investor relations, MobiKwik: “Our app users can buy and sell 24-carat gold of 99.5 per cent purity for an amount as low as Rs 1. They also have the flexibility to buy any amount of gold in rupees or in grams. They can also sell it any time 24 hours after the purchase.”

One area of concern is that digital gold is not regulated. Says M Barve, founder, MB Wealth Financial Solutions: “There is no regulator for digital gold at present.”

Buyers should be aware that each platform has another seller at its back-end. Paytm and PhonePe have partnered gold refiner MMTC-PAMP, while MobiKwik and Amazon have partnered SafeGold. Says Surendra Mehta, secretary, Indian Bullion and Jewellers Association: “Customers should buy gold only from companies experienced in the gold business.”

Investors also need to keep a close eye on the price. The price on the app is valid only for a few minutes from the time you click the ‘buy’ option.

Redemption is easy. Says Lucien: “Customers can, at any point in time, request for physical delivery of the gold they have purchased in the form of gold coins and bars.”

The gold is stored on your behalf in the seller’s vault at no cost for two-five years. You can sell or withdraw anytime within this period. After this period, you need to sell or take delivery of your gold. For redeeming physical gold after the custody period, many apps will levy additional charges. If you sell, the money will be credited into your bank account after charging a convenience fee.

If you have asked for delivery of physical gold, be watchful. Some apps’ terms and conditions say it is the customer’s duty to verify the parcel for damage or tampering. If the customer accepts the parcel and later discovers damage or tampering, the seller will not be liable.

Finally, treat digital gold as a route for purchasing physical gold. If you wish to buy gold as an investment, go for sovereign gold bonds, which pay an interest of 2.5 per cent per annum, provided you wish to invest for the long term (liquidity is an issue). If you wish to enjoy liquidity, gold exchange-traded funds are a better option though they charge an annual expense ratio.

HOW TO BUY AND SELL DIGITAL GOLD
 

• Log into the app, check the price, and execute the order
• The rate depends on international price and Customs duty
• Price also includes transaction and storage cost
• Once you confirm the order and pay, gold is assigned to a vault in your name
• To sell, click on the price and execute the order. Once you confirm, gold moves out of the vault 
• You can get money in your app account, or have physical gold or jewellery delivered
• You need to pay minting/making and dispatch charge for physical gold