Buy E-Gold and Hedge Inflation
The shine of gold has always attracted humankind since its discovery. People like to buy e-gold for various purposes – jewelry, investment, and even safeguard them against inflation. To respond to the varying needs of investors, marketers have launched multiple ways to invest in gold. One of such methods is e-gold.
What is E-Gold?
Launched by National Spot Exchange (NSE) in 2010, e-gold is another form of investing in gold. The difference is that, unlike physical gold, no e-gold can be traded on stock exchanges. It even allows for making small investments. It works well for small investors who want to invest in gold with lower denominations than physical gold.
Advantages & Disadvantages of Investing in E-gold
As the name suggests, e-gold is an electronic way of investing in gold. When you buy e-gold, you can trade them just like shares through NSE. Here one unit of e-gold is equal to 1 gram of gold.
The various advantages of e-gold are as follows:
- The gold rates on NSE are based on Indian Market rates. So, e-gold units are traded at prices based on Indian markets.
- Through e-gold, investors can buy and sell gold in small denominations, as small as 1 gram. It allows small investors to fulfil their dream of investing in gold and securing their future.
- E-gold involves investing in gold of the highest purity. There are no risks of impurities.
- All transactions of e-gold are transparent pricing and seamless in trading.
- One can sell e-gold at any point in time.
The various disadvantages of e-gold are as follows:
E-gold is an excellent gold investment option. But before investing money in it, you should also be aware of some of the drawbacks of investing in e-gold.
- There is a storage charge for e-gold charges by NSE. This charge is about 60 paisa per month per unit of e-gold.
- There might be a slight possibility of someone hacking into your e-gold account. However, most companies use a robust security system, so the chances of such an incident are significantly less. At the customer end, one needs to maintain the secrecy of passwords and ensure that the account is protected.
How to Invest in E-Gold?
E-gold is one of the ways to invest in gold. Here gold is bought electronically. To invest in e-gold, one needs to have a trading account with specified NSEL dealers. Like shares, e-gold units can be bought and sold through the exchange. Here one unit of e-gold is equal to 1 gram of gold.
Taxes and Charges
- To begin with, NSE charges a storage fee for keeping an equivalent amount of physical gold safely in their custody. This charge is 60 paisa per unit per month.
- Conversion of physical gold into e-gold attracts a conversion charge of Rs. 100 for 1 gram coin and Rs. 400 for 8-gram/10-gram coins. There are no conversion charges.
- If you buy e-gold and sell it before 3 years, you need to pay income tax as applicable as per the slab rates. In addition, any e-gold held for more than 36 months attracts a capital gain tax of 10%.
- A VAT is charged at 1% plus octroi charges (when your purchase enters the state) to convert electronic units into physical coins.
How to Buy E-gold?
- E-gold is the process of buying gold electronically. To buy e-gold, an investor needs to open a trading account with specified NSEL dealers. Once the account is opened, you can buy e-gold units just like shares.
- The investors need to have a Demat account. Investors may use one account or separate ones for equities and commodities like e-gold.
- Once the account is opened, you can trade in e-gold. The trading is open from Monday to Friday, between 10 am to 11.30 pm. The e-gold units you buy are credited to your account within T+2 days.
- If required, you may redeem your e-gold units into physical gold and take their delivery. 1 unit of e-gold is equal to 1 gram of physical gold.
The love story between Indians and gold goes a long way. To serve the different investment needs of various people, there are multiple ways of investing in gold. Earlier, people used to invest in physical gold, but looking at the amount and risk involved in buying and storing physical gold, smart investors today prefer to buy e-gold as an alternate way of investing in gold.
E-gold is one of the ways where one can invest in gold electronically. It saves the investors from the risks associated with the safe storage of the gold. The investors can start with small investments and buy-sell in e-gold units just like shares.
Frequently Asked Questions
Q1: Is e-gold a good investment?
Ans: Compared to physical gold, digital gold is a better investment option. Physical gold has purity concerns, and it entails high costs in the form of making charges, which are deducted at the time of selling the gold product. Both these concerns are not there in the case of digital gold.
Q2: Is e-gold safe?
Ans: Launched by NSE, e-gold is a safe investment in gold in electronic form.
Q3: Is it better to buy physical gold or ETF?
Ans: Buying physical gold involves charges in terms of making, storing, and again while selling it. On the other hand, ETFs allow investors to invest in gold while avoiding the costs and inconvenience of markups, storage costs, and security risks of holding physical gold. Also, like the shares, these ETFs can be traded on a stock exchange.
Q4: Can we sell digital gold?
Ans: Buying and selling digital gold is easy. You may easily sell your gold digitally back to the platform whenever you want without facing any deductions.
Q5: Do gold ETFs pay dividends?
Ans: Equity-based gold ETFs, i.e. investment in stocks of firms related to the gold sector, offer dividends. However, no dividends are offered if the gold ETFs hold the precious physical metal or hold gold futures contracts.