What the Ban on Digital Gold Means for Gold ETF investors?

Posted On Wednesday, Sep 08, 2021


With the festive season here, it might be a good time to invest in financial forms of gold, which is a hassle-free way to invest in gold and also does not have any purity concerns or price markups like those attached to buying physical gold.

Recently, NSE has restricted sale of Digital gold by stock brokers after SEBI flagged concerns stating that it does not come under the definition of securities. Therefore, starting Sep 10, 2021 it has restricted stockbrokers to offer Digital gold on their platforms. This means investors will no longer be able to invest in digital gold through their stockbrokers after the said date. They can exit their investments and take a physical gold delivery directly from MMTC-PAMP. However, this ban does not affect Gold ETFs (Exchange Traded Funds).

Gold ETF or Digital Gold: How Are They Different?

Both Gold ETFs and Digital Gold allow investors the option to buy digital gold online without holding it in the physical form. They offer physical gold backing. However, the difference is that Digital gold offerings are unregulated, leading to concerns regarding gold backing, etc. and provide no recourse to investors if something goes wrong.

Illustration 1: Digital Gold - A distant cousin

Gold ETFDigital Gold
Min ½ gram to 1 gram and no max limitRs.1 and max Rs.2 Lakhs*
Regulated by SEBIUnregulated
Physical Gold BackingPhysical Gold Backing

*Depending on the platform

What Can You Do?

To avoid any regulatory flak in the future, you can look at regulated investment avenues such as Quantum Gold ETF and Quantum Gold Savings Fund which is a Fund of Funds scheme that invests in the Quantum Gold ETF. Here are the advantages of investing in the Quantum Gold ETF and the Quantum Gold Savings Fund.

How to Use the Correction to Build your Allocation?

Since Gold prices have corrected from the highs touched in 2020, you can use the correction to build your allocation to gold. We believe that the fundamentals that uphold long-term value continue to remain strong which include:

Invest the easy and regulated way through the Quantum Gold ETF or the Quantum Gold Savings Fund.

Watch our latest Mega webinar video on Asset Outlook & the Economic View in the Current Market Scenario where Chirag Mehta, Sr. Fund Manager, Alternative Investment, give you further insights into the future prospects of Gold.

Product Labeling

Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Gold Fund

An Open Ended Scheme Replicating / Tracking Gold
• Long term returns

• Investments in debt / money market instruments.
Quantum Equity Fund of Funds
Investors understand that their principal will be at Moderately High Risk
Quantum Gold Savings Fund

An Open Ended Fund of Fund Scheme Investing in Quantum Gold Fund
• Long term returns

• Investments in physical gold.
Quantum Equity Fund of Funds
Investments in units of Quantum Gold Fund – Exchange Traded Fund whose underlying investments are in physical gold

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in the Risk O Meter is based on the portfolio of the scheme as on August 31, 2021.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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