‘Don’t fall for the shine…’: CA lists hidden costs of physical gold, silver investments
In a detailed post on X (formerly Twitter), Chartered Accountant Nitin Kaushik cautioned investors against the allure of physical gold and silver, arguing that emotional appeal often blinds buyers to the hidden costs and inefficiencies of tangible metal investments.
“Gold and silver feel safe. They shine. They create a sense of wealth,” Kaushik wrote, before dissecting three often-overlooked challenges that come with buying physical precious metals: spreads, storage, and purity concerns.
The spread trap
Kaushik highlighted that most retail buyers underestimate the buy-sell spread — the difference between what they pay and what they can get when they sell. “Buying physical gold means paying the retail price, which includes dealer margins, GST, and making charges,” he noted. “But when you sell, you get the wholesale price.”
He illustrated with an example: a buyer who purchases at ₹1.22 lakh per kg may only be able to sell at ₹1.18 lakh — an immediate loss of ₹4,000 per kg, even if market prices remain unchanged.
In contrast, digital gold or gold ETFs have spreads as low as ₹500-₹2,000 per kg, which significantly improves the cost efficiency for long-term investors.
Storage & Safety
Physical gold requires secure storage — lockers, insurance, and protection against theft — all of which come with recurring costs and anxiety. “Annual locker charges for 10 kg can be substantial,” Kaushik pointed out, adding that there’s always a “peace-of-mind risk” involved.
Digital alternatives, on the other hand, are stored in insured, audited vaults. “A ₹10 lakh investment in digital gold or silver is hassle-free, and you never worry about where to keep it,” he said.
Purity concerns
Even hallmarked physical gold can come with hidden impurities or resale discounts, especially for jewellery due to making charges. Kaushik warned that purity is often taken for granted: “Physical gold & silver can contain hidden alloys, especially outside reputable dealers.”
Digital gold and silver ETFs, he said, ensure guaranteed purity and are backed by SEBI-regulated custodians or certified vaults, eliminating the need for testing or quality disputes at resale.
‘How you own it matters more’
Kaushik concluded that while physical gold retains cultural and emotional value — especially for gifting or jewellery — digital formats make far more sense for investors focused on returns, transparency, and convenience.
“If the financial system collapses, physical metal has its argument,” he wrote. “But for most investors, digital offers lower spreads, hassle-free insured storage, guaranteed purity, and instant liquidity.”
He emphasized that smart investing is not just about the asset but the structure of ownership: “Gold and silver can diversify your portfolio — but how you own them matters even more.”