Summary of "PAXG , XAG Explained | Much Better Than Silver ETF and Gold ETF | SAGAR SINHA"
PAXG, XAG Explained | Much Better Than Silver ETF and Gold ETF | SAGAR SINHA
Assets & Instruments Discussed
- PAXG: A crypto token backed 1:1 by physical gold (1 PAXG = 1 troy ounce ≈ 31 grams gold).
- XAG: A crypto token backed by physical silver (1 XAG = 1 troy ounce silver).
- Gold ETFs and Silver ETFs: Traditional investment vehicles backed by gold and silver held in Indian vaults.
- Futures Contracts: Available for both PAXG (gold) and XAG (silver) on crypto exchanges.
- Spot Market: Available for PAXG (gold) but not for XAG (silver).
Key Features and Comparisons
PAXG (Gold Token)
- Backed by real physical gold stored in highly secure London vaults (UK).
- Issued by Paxos Trust Company, regulated by New York State Department of Financial Services (NYDFS), ensuring credibility and transparency.
- Price example: 1 PAXG ≈ ₹4.8 lakh (price of 31 grams gold).
- Fractional buying allowed (can buy gold worth as low as ₹400).
- 24/7 trading availability on crypto exchanges (unlike ETFs limited to stock market hours).
- Can convert tokens into physical gold delivery.
- Digital receipt of gold ownership recorded on blockchain.
XAG (Silver Token)
- Backed by real physical silver stored in international vaults.
- Currently available only in futures contracts, no spot market.
- Similar benefits as PAXG but limited to futures trading.
ETFs (Gold and Silver)
- Backed by physical metals stored in Indian vaults.
- Trading limited to stock market hours (9:15 AM - 3:30 PM IST).
- No fractional buying below 1 gram.
- No 24/7 trading; delayed reaction to global events.
- No leverage available.
Trading & Leverage
- PAXG and XAG futures offer leverage up to 50x, significantly higher than MCX commodity futures (typically 10-20x).
- Leverage is a double-edged sword: it can amplify gains but also total losses.
- Spot buying means owning the actual token; futures mean owning a contract without physical tokens.
- Futures contracts on crypto exchanges have no expiry (perpetual contracts), unlike traditional futures which expire monthly.
- Users can hold futures contracts for years if desired.
Taxation Differences
Aspect Spot Crypto (PAXG) Futures Crypto (PAXG, XAG) Gold/Silver ETFs Tax Rate Flat 30% on profits Taxed as business income per slab Capital gains tax as per holding period TDS 1% TDS deducted automatically Usually no TDS deducted As per mutual fund/ETF rules Tax Efficiency Less tax efficient More tax efficient Depends on holding period Loss Set-Off Losses not allowed to set off Losses can be adjusted as business losses Allowed as per capital gains rules- Buying futures contracts can help avoid the flat 30% crypto tax.
- Spot purchases are taxed at 30% plus 1% TDS on sale amounts above threshold.
- Futures contracts are taxed according to individual income tax slabs, potentially lower than flat 30%.
Platform & Risk Management
- Recommended exchange: CoinDCX (largest Indian crypto exchange with 2 crore+ users and Rs 2.44 lakh crore quarterly volume).
- CoinDCX is FIO compliant, considered more reliable and secure.
- Crypto is legal but not regulated in India, implying risk of exchange hacks or regulatory changes.
- Users should be cautious about exchange risk and leverage risk.
- Prefer buying futures over spot if aiming for tax efficiency and long-term holding without physical delivery.
Methodology / Framework Shared
How to Buy PAXG/XAG
- Use CoinDCX app (link provided in description).
- Complete KYC via provided link for 20% brokerage discount.
- Search for PAXG (gold) or XAG (silver).
- Choose between spot (PAXG only) or futures (both PAXG and XAG).
- Select quantity (fractional buying allowed).
- Use leverage carefully if trading futures (max 50x shown, but caution advised).
- Monitor positions, use stop-loss and adjust quantity as needed.
- Close positions when desired.
Tax Optimization Strategy
- Buy spot PAXG for physical ownership but expect 30% tax on profits.
- Buy futures contracts to avoid 30% flat tax; taxed as business income.
- Hold futures long term (no expiry).
- Avoid moving tokens to hardware wallets if holding futures (no physical tokens).
- For silver (XAG), only futures available, so leverage futures for trading.
Additional Insights
- Digital gold bought via UPI apps (PhonePe, Paytm) is not backed by real gold and is considered risky and unregulated by SEBI.
- PAXG/XAG tokens are backed by real physical metals and audited regularly.
- Trading PAXG/XAG offers global exposure and benefits from currency depreciation (INR weakness).
- Volatility is high, which can be advantageous for traders.
- Physical delivery option exists for PAXG spot tokens but not for futures.
Key Numbers & Examples
- 1 PAXG token ≈ 1 troy ounce gold ≈ ₹4.8 lakh.
- Fractional buying from as low as ₹468 (0.01 quantity).
- Futures margin example: ₹1000 position with 50x leverage requires only ₹19 margin.
- CoinDCX quarterly volume: Rs 2.44 lakh crore.
- Tax: 30% flat on spot crypto gains; slab-based on futures.
Disclaimers
- Crypto trading is legal but not regulated in India.
- Exchange risk exists (hacking, fraud).
- Leverage trading is high risk and can lead to total capital loss.
- Taxation depends on individual circumstances; consult a tax advisor.
- This is not financial advice; viewers should do their own research.
Presenter / Source
- Sagar Sinha
Summary Table (as per video)
Feature Gold ETF Silver ETF PAXG (Gold Token) XAG (Silver Token) Backing Physical gold in India vault Physical silver in India vault Physical gold in London vault Physical silver in international vault Ownership Proof AMC certificate AMC certificate Blockchain token (crypto) Blockchain token (crypto) Trading Hours Stock market hours (9:15-15:30 IST) Stock market hours 24/7 global crypto market 24/7 global crypto market (futures only) Fractional Buying Minimum 1 gram Minimum 1 gram As low as ₹400 worth Futures only, fractional Leverage None None Up to 50x (futures) Up to 50x (futures) Tax Capital gains tax Capital gains tax 30% flat (spot), slab-based (futures) Slab-based (futures only) Physical Delivery Yes Yes Yes (spot only) No Regulation SEBI regulated SEBI regulated NYDFS regulated (Paxos) NYDFS regulated (Paxos) Volatility Low to moderate Moderate High HighEnd of Summary
Category
Finance
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