'Down 6% As You Buy': Nithin Kamath Cautions Against Digital Gold Investments

Zerodha co-founder and CEO Nithin Kamath on Wednesday issued a warning to investors buying digital gold. He said investors lose nearly 6% the moment they purchase digital gold. Kamath’s warning comes days after the Securities and Exchange Board of India (SEBI) issued an advisory cautioning investors to avoid unregulated products like digital gold.

In a post on X, Kamath wrote, “Digital gold is unregulated. A timely reminder from SEBI. Most people don’t realise that nobody regulates digital gold, and if something were to happen to the platforms or companies selling it, there’s not much you can do.”

He added that buying digital gold is an expensive way to get exposure to gold. “You pay 3% GST right away. Then there are spreads of another 2–3%, which means as soon as you buy, you’re already down about 6%, and that’s before even factoring in regulatory risk,” Kamath explained, referring to taxes and platform fees.

He further suggested that for gold exposure, investors should consider safer, regulated alternatives. “Now that Sovereign Gold Bonds (SGBs) have stopped, gold ETFs remain one of the safest and easiest ways to get exposure to gold,” he added.

SEBI advised investors to explore options such as physical gold, Gold Exchange Traded Funds (ETFs), or Exchange Traded Commodity Derivative Contracts.

According to SEBI, gold ETFs are safer as they fall under its regulatory framework, which protects investors’ interests.

“It has come to the notice of SEBI that some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’. Digital Gold is being marketed as an alternative for investment in physical gold,” the regulator said in its advisory dated Nov. 8.

“It is informed that such digital gold products are different from SEBI-regulated gold products as they are neither notified as securities nor regulated as commodity derivatives,” the advisory added.

SEBI’s warning followed a surge in gold demand in India due to global economic uncertainty and geopolitical tensions. These factors have pushed gold prices up by more than 50% in 2025 so far.

According to ET Wealth, UPI transactions in digital gold alone have jumped from Rs 760 crore in January to nearly Rs 1,180 crore by August, signalling strong investor interest in the yellow metal.