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Should you invest in Motilal Oswal's digital gold scheme?

The scheme allows investors to buy gold in denomination as low as Rs 500 and in Re 1 multiples thereof on the mobile app and web platform.

, ET Bureau|
Last Updated: Oct 23, 2017, 06.30 AM IST|Original: Oct 23, 2017, 06.30 AM IST
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If you were looking to gain by investing in this scheme then you would have ended with low returns.
If you were looking to gain by investing in this scheme then you would have ended with low returns.
Motilal Oswal has launched Me-Gold, a digital gold investment scheme under which gold is sold by MMTC-PAMP through Motilal Oswal digital platforms. It allows investors to buy gold in denomination as low as Rs 500 and in Re 1 multiples thereof on the mobile app and web platform. It can be stored in MMTC-PAMP vaults, at no extra cost or annual maintenance fee.

Kishore Narne, Associate Director & Head, Motilal Oswal Commodities says, “Making charges and delivery charges will be applicable if the investor opts for the physical delivery of a coin or bar.”

Brijesh Parnami, CEO of Essel Wealth Services says, “This seems to be a convenient and secure way for investors to buy or accumulate the best quality gold at competitive rates.” The holdings will be recorded as digital balance in grams and can be converted into physical gold at any time.

Customers also can sell it back on the same platform or exchange it for jewellery at empanelled jewellers like PC Jewellers, Senco Gold and Waman Hari Pethe Jewellers.

The advantages of the scheme include transparency and competitive prices as they source gold directly from the refiner. It also offers the option of accumulating gold systematically through this gold savings plan.

However, there are certain disadvantages to watch out for.

“What works against the scheme is that you must compulsorily sell or have the gold delivered within five years of buying it. Also, in the absence of any transaction for 18 months, the account will be deactivated. This is where gold ETFs and gold funds outscore the platform,” says Manish Kothari, Head of Mutual Funds at Paisabazaar. com.

Jewellers are also of the opinion that the scheme doesn't make much sense as an investment. “Me-Gold promotes online trading, but traditional buyers of gold are mostly in the 40-60 age bracket, and prefer physical markets,” says Pritesh Goyal, Director and Designer, SLG Jewellers.

Gold prices have remained stagnant around Rs 30,500 per 10 gram over the past. So, if you were looking to gain by investing in this scheme then you would have ended with low returns. Disciplined investors who want to benefit from the expected price rise should opt for gold ETFs, as they are more cost-effective than the Gold-Me scheme.

Low returns when gold prices are stable
Should you invest in Motilal Oswal's digital gold scheme?
The 20.36 gm of gold accumulated by the end of September 2017 was Rs 62,511. The internal rate of return works out to 4.2%.
Compiled by : ETIG Database

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