The latest products from India are sold as a seamless way to switch between the two. In practice, though, the economics point to simpler, cheaper alternatives being more your speed. The story is modern; the application, for now, is a bit of a niche.
The pitch vs investor reality
You can see where we’re headed with two recent moves. On 29th April, Dhan put out a gold vault, and the NSE followed with Electronic Gold Receipts on 4th May. They both let you have your regulated market access and still walk away with the metal if you want.
It’s a hot time to be in the business. The World Gold Council puts India’s Q1FY26 demand at $25 billion, and Bloomberg has MCX prices up 122% in two years.
With EGRs, you are essentially putting gold in demat form. Metal from a vault becomes an electronic receipt you can trade like a share, in any size from 100 milligrams to a kilo. Purity is not an issue – you get 995 or 999. Dhan’s side of things lets you in on 999 in as little as a gram, and using the MCX for settlement means you don’t have to worry about the kind of counter-party risk you’d find with some unregulated sellers.
Then there is the pricing. “We give users live MCX-linked prices,” says Jay Gupta, COO at Dhan. He will tell you there have been days with a 5% swing from morning to evening, which is something you don’t get with the old ways of doing things.
Security is the other selling point. Having your gold in a regulated vault takes the edge off the anxiety of stashing bars and coins in the house, and it’s a lot more transparent than what you see in the open market.
Delivery turns into a hurdle
But ask for delivery and the smooth ride ends. With an EGR, you file for redemption and the vault manager gets the gold ready. The problem is where you collect it. There are just two vault managers out there – Sequels and Brinks. According to their site, Sequel is in 75 cities. You might be put out to make a long trip for 10-15 grams.
Dhan will do a doorstep run for you, but they will charge for it. And it makes you wonder: why are you really doing this? For most families, it’s for the jewellery in the end.
Why ETFs still undercut the new hybrids
Once you cross over to the physical, the costs start to mount. GST, storage, delivery – it all chews into your returns. “The minute you take delivery, you are down 3% on account of the GST,” says Amit Sahita of Fincode Advisory. “An ETF is more logical, even with an expense ratio of 40-50 basis points.”
And you can’t get around the fact that you’ll need a jeweller to make it into something you can wear. Abhishek Kumar, a Sebi-registered advisor, says that brings back the whole question of trust on purity and buyback that these platforms were supposed to fix.
Access and inclusion vs practical use-cases
On paper, the exchanges and depositories have built a robust system to democratise this. The small ticket sizes and top-shelf purity are meant to win you over.
Yet for many, gold is personal. It’s for a wedding, a gift. Put a jeweller in the middle of that and you have the same old frictions.
Where these products do make sense
That said, a hybrid has its place. A bullion user or a jeweller looking to plan inventory with some standardisation will appreciate it. For a household, it’s about the option to build up digitally and then have the comfort of being able to hand it over later.
Here are scenarios where the hybrids could fit better than ETFs:
– Businesses managing gold inventory cycles
– Buyers needing 999 purity for fabrication
– Families planning future gifting with delivery
If you are in it for the price action, an ETF is plain and simple. No lumpy fees, no GST, and you know what you are paying.
The hybrids are made to be a bridge between the market and the metal. Fine if you are going to cross it. Not so much if the delivery is only in your head.
Policy backdrop and what to watch
Add to that the macro environment. After the West Asia situation, PM Modi has asked people to hold off on non-essential gold for a year. Then on 13th May, the import duty was hiked to 15%. It changes the mood and the math.
EGRs are here to put gold in the capital markets and clean up the pricing. Fair enough. But until the delivery side of things is less of a hassle and the jewellers are on board, they won’t be displacing the way most of us invest.
What most investors should weigh
Here is the litmus test: if you have no intention of taking delivery, the extra steps in a hybrid are working against you. An ETF does the job without the detours.
