Summary of this article
Digital gold purchases surged ahead of the festive season.
Sebi warned against investing in unregulated digital gold products.
Retail buyers are moving towards regulated paper gold investments.
Ahead of the onset of the festive season in October, the World Gold Council (WGC) has projected that the overall demand for gold is expected to improve as the festive and wedding season progresses.
The demand is expected to be supported by the broader investment demand for the yellow metal, along with wedding-related buying. However, elevated prices and volatility in gold prices are expected to continue to constrain discretionary buying.
A Shift in Buying Traditions
Amid the anticipation of heightened demand later this year, the way gold is bought is also changing. Traditionally, the festive season and winter wedding months trigger a rush for physical jewellery and coins, as Indian households view the metal as an auspicious wealth builder. However, a shift away from only buying physical gold is underway as some investors appear to be shifting from physical gold.
The Surge in Digital Gold
According to the report, digital gold buying held steady from June to August, averaging around Rs 2500 crore per month. While monthly purchases were stable over the period, demand was significantly higher than a year earlier; purchases in August 2026 were up 110 per cent year-on-year compared to August 2025. In volume terms, purchases averaged 1.6 tonnes per month from June to August.
The Regulatory Grey Area
Notably, this surge in digital gold purchases has happened despite the Securities and Exchange Board of India (Sebi) warning against investing in digital gold. Earlier in November 2025, Sebi explicitly cautioned that digital gold products operate entirely outside its regulatory purview.
The market watchdog highlighted that these products are neither notified as securities nor regulated as commodity derivatives, and the nearly Rs 7500 crore of digital gold accumulated over these three months alone sits in a regulatory grey area.
Thus, if a platform were to default, investors would have no access to standard statutory protection mechanisms or Sebi grievance portals, leaving them exposed to pure counterparty and operational risks. However, talks are on, according to a report by The Economic Times, to regulate digital gold.
The government is reportedly considering bringing the sector under the joint oversight of the Reserve Bank of India (RBI) and Sebi, a move that would mandate every digital unit to be strictly backed by physical bullion.
Regulated Alternatives See Rising Participation
While some new retail buyers bought digital gold from unregulated apps, a noticeable switch is happening as many investors are actively moving towards regulated paper gold investments.
This migration has driven the participation in gold futures and gold exchange-traded funds (ETFs). According to the WGC report, Indian gold ETF inflows surged 67 per cent month-on-month in August to Rs 2,597 crore, with total holdings increasing by 1.6 tonnes to reach 121.3 tonnes.
Similarly, gold futures trading also saw a significant pickup. On the Multi Commodity Exchange (MCX), the average daily turnover (ADTO) jumped 38 per cent month-on-month to Rs 2950 crore, hitting its highest level in five months. The average daily volume on the exchange also rose 27 per cent to 19 tonnes. These investment avenues provide investors a regulated way to add the yellow metal to their portfolios efficiently amid the festive rush.
Safe Allocation for the Festive Season
Until the government formalises the framework for regulating digital gold, festive shoppers looking to add the yellow metal to their portfolio amid the festive season must tread carefully.
Investors seeking to invest should stick to Sebi-regulated avenues like Gold ETFs, Gold Mutual Funds, and Electronic Gold Receipts (EGRs), or the purchase of RBI-issued Sovereign Gold Bonds (SGBs) from the secondary market till the regulatory fog around digital gold clears up.
