Have you noticed how every time an asset class becomes popular, a wave of “innovative” products follows, all promising easier access, smaller ticket sizes, and instant gratification?
We saw this with fintech lending, gaming and betting apps, and even fractional real estate. Many of these innovations start in an unregulated space, attract rapid investor attention, and only later draw the regulator’s eye once the risks begin to show.
Gold has always held a special place in Indian households, both as an emotional and financial asset. With gold prices soaring over the past year, investor interest has surged once again. But unlike earlier cycles, this time the enthusiasm has spilled over into a new format: digital gold, especially via UPI-based platforms and payment apps, which have seen a steep rise. Several investors and clients have asked whether it makes sense to buy gold this way, often comforted by the idea that it is “backed by MMTC” and therefore somehow “government approved.”
That perception, however, isn’t quite accurate, and it’s worth unpacking why.
Digital gold is essentially a way to buy small quantities of physical gold online. When you buy, the platform claims to hold an equivalent quantity of gold in a vault on your behalf. You can later sell it back digitally or request physical delivery.
Most digital gold platforms in India partner with one of three providers: MMTC-PAMP, Augmont, or SafeGold. Among these, MMTC-PAMP is often assumed to have government backing because of its name. In reality, MMTC-PAMP is a private joint venture, 26% owned by the Government of India’s MMTC Ltd. and 72.65% by Switzerland’s MKS PAMP Group.
This means your digital gold purchase is not directly backed or guaranteed by the Government of India.
In a recent notice, SEBI cautioned investors against buying digital gold on online platforms. The key takeaway:
Digital gold is not recognised as a “security” or a “commodity derivative.”
It therefore falls outside SEBI’s regulatory and investor protection framework.
This matters because, in the absence of regulation, there are no clear standards around how the gold is stored, insured, or priced. If a platform were to face financial distress or close down, your recourse as an investor could be limited.
As we often remind our clients, it is prudent to avoid unregulated products, especially those that seem safe simply because they are convenient or popular. Risks in such products often become visible only in hindsight.
One aspect most people miss is how the price of digital gold is determined. Unlike listed securities or mutual fund units, which are priced transparently and uniformly, digital gold prices are set individually by platforms.
Between September and November 2025, for instance, digital gold on some leading UPI platforms was reported to be ₹150–₹250 per 10g higher than official gold prices on the MCX, and even higher than retail store prices in some cases. This gap arises because each platform adds its own premium and spreads, and since there is no exchange or regulator overseeing it, there is no uniform price discovery mechanism.
So, depending on which app you use, you might be paying more than the actual market price of gold.
Another often-overlooked point is the 3% GST levied on digital gold purchases. Whether you buy one gram or a kilogram, through a UPI app or a digital platform, you pay 3% GST upfront on the value of the gold, just like buying physical coins, bars, or jewellery.
In contrast, gold ETFs (Exchange-Traded Funds) and FoFs (Funds of Funds), which are regulated mutual fund products, do not attract GST when you buy or sell units. Instead, they carry a low annual expense ratio, typically around 0.10%–1.20% for ETFs and FoFs.
Of course, physical gold continues to hold emotional and cultural value in India, especially when bought as jewellery for weddings, festivals, or heirlooms.
That is an entirely different motivation from investment, and there is nothing wrong with it. The key is to not confuse emotional or traditional gold buying with investment decisions meant to preserve or grow wealth.
For those looking to add gold as part of a diversified portfolio, the best options remain the regulated and transparent products:
Gold ETFs: Trade on stock exchanges, fully backed by physical gold, with daily price transparency and low costs.
Gold FoFs (Funds of Funds): Mutual fund schemes that invest in gold ETFs, accessible even without a Demat account.
Earlier, Sovereign Gold Bonds (SGBs) issued by the RBI offered an excellent, cost-effective way to invest in gold, with the added benefit of interest income and capital gains exemption if held to maturity. Unfortunately, there is no active SGB issue currently open for subscription.
Digital gold might seem modern, convenient, and accessible, but convenience shouldn’t come at the cost of safety. Without regulatory oversight, standardised pricing, or investor protection, it sits in a grey area that is best avoided.
The intent here is not to recommend buying or selling gold. Rather, we encourage investors to review their gold exposure in the context of their broader asset allocation framework, financial goals, and risk appetite.
The point is simply this: if your reason for buying gold as jewellery or coins is cultural or emotional, it should be recognised as a consumption decision rather than an investment one. If you wish to hold gold as part of your asset allocation, consider doing so through regulated routes such as Gold ETFs or FoFs.
Sometimes, in finance as in life, the safest path isn’t the newest or the flashiest, it is the one that plays by the rules.
Wizr is an AMFI registered Mutual Fund Distributor.
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