A metal is deemed precious if it is rare, and gold is certainly on top of this list. From a physical, emotional, and financial viewpoint, humans have been drawn to this shiny metal since time immemorial. Gold bars are among the most trusted investment instruments thanks to their innate value and resistance to corrosion.
However, there are downsides to storing physical gold – think possibility of theft, accidental loss, low resale value owing to making charges, as well as storage cost in case you choose a bank locker to keep it safe and sound. Thankfully, technology has provided a way out – enter digital gold!
Wondering what this is all about? Read more and find out.
Digital gold refers to the modern way of investing in gold without physically owning it. Through Blockchain technology that generates digital gold, individuals can buy, sell, and store gold securely in digital form.
Since the value of digital gold is linked the price of the physical gold, it is a secure and reliable investment options. Investing in digital gold provides you with the security of real gold ownership while getting access to cryptocurrency trading.
In short, yes. In fact, if you want to invest in gold, this is perhaps the best option. Digital gold is 99.9% pure 24K gold which does not come with the burden of storage. You can invest in this gold option online through a UPI transaction or internet banking. However, this does not mean that no equivalent physical gold is reserved in your name. When you buy gold in digital form, the seller will stock the same in their secure vaults, relieving you of the danger of theft or accidental loss.
Digital gold offers great flexibility and convenience of investment through various platforms, such as-
1. Digital gold platforms: Various online platforms allow you to buy, sell, and hold digital gold through a user-friendly interface.
2. Gold ETF: Gold ETFs (Exchange Traded Funds) offer exposure to gold prices without physically holding the gold. You can buy gold ETFs through the stock exchange.
3. Gold-linked Bonds: These financial products link their returns to the price of gold and provide a fixed income with the potential for great returns.
4. Mobile apps: Various dedicated mobile apps offer easy access to digital gold.
5. SIPs: Some platforms also allow you to set up SIP investments to invest in digital gold regularly.
6. Payment gateways: Several payment gateway platforms integrate digital gold investment to allow you to purchase digital gold online seamlessly.
7. Gold digital certificates: These certificates indicate ownership of a particular amount of gold stored in the secured vaults and are issued by financial institutions.
8. Gold-backed cryptocurrencies: Digital currencies backed by gold reserves are a unique new investment option that can be traded through blockchain platforms.
| Gold investing instrument | Advantage | Disadvantage |
| Solid gold | Easy to trade in the physical form. | Keeping the gold secure requires additional costs for storage. They are also a passive investment, as returns can only be realised upon sale. |
| Digital gold | Easy to trade and store. It can be converted to physical gold (if the investor has a certain number of units) | There are no government regulations managing digital gold. Further, the sale, purchase, and storage of digital gold incur transaction fees. |
| Advantages of digital gold | Disadvantages of digital gold |
| Accessibility: Digital gold can be purchased easily through various financial platforms, mobile apps, and online wallets. This convenience makes digital gold accessible to everyone, including those who may not be able to visit traditional gold markets. | No Physical Access to Your Gold: Even though your investment is backed by real gold, you do not physically hold it, which might be a concern for some investors who prefer tangible assets. |
| Small investments: Digital gold allows investors to start with very small amounts, making it a flexible option for those who cannot afford to invest in large quantities of physical gold. This feature is ideal for people who want to build their gold portfolio gradually. | Price Volatility: Like physical gold, digital gold is not immune to price fluctuations. Gold prices can be highly volatile, influenced by global economic factors and market trends, leading to investor losses. |
| Liquidity: Digital gold is a highly liquid investment that allows investors to convert the investment to cash quickly and easily. | Storage and security: While digital gold eliminates the physical storage of gold, investors may still be concerned about the integrity and security of digital gold. |
| Transparency: Digital gold platforms provide transparent pricing and access to transaction records, boosting investor confidence. | Regulatory risks: Regulatory changes in the digital gold market can affect the accessibility and value of these investments. |
Taxation on digital and physical gold is different based on various factors-
1. Digital gold
Digital gold is subject to capital gains tax on sale. Investments held for up to 3 years are considered short-term and are taxed as per the investor's tax slab on redemption. If the investment is held for over 3 years, long-term capital gains are considered and taxed at 12.5%.
Additionally, the purchase of digital gold carries a GST of 3%.
2. Physical gold
Physical gold is also subject to capital gains tax and taxed similarly to digital gold. However, a GST of 3% is levied on the making charges for gold jewellery, in addition to the custom duty on imported gold.
Investing in digital gold offers many benefits, including –
• Safety and security
This is perhaps the most important benefit. Investing in digital gold relieves you from the fear of theft or accidental loss that comes with storing physical gold in a locker at home.
Additional Read: Top Rated Funds
• Guaranteed metal purity
In the case of physical gold, it is crucial that you buy hallmarked gold, or you may get duped into purchasing counterfeit metal. But this is never the case with digital gold, mainly because they are certified by government agencies.
• Available at low amounts
Physical gold is anything but cheap. However, you can purchase digital gold for an amount as low as Re. 1! If you think this is an unlikely amount for such a precious metal, there's a reason - purchasing digital gold allows you to invest in fractional gold; plus, its price is determined by the wholesale market rate, not other factors such as geography or even a pandemic, making it highly affordable.
• It saves you storage costs
If you were to opt for a bank locker to store physical gold, you'd need to pay monthly rent for as long as you'd use the locker. Thankfully, your digital gold investments stay secure without additional storage costs.
Remember that most sellers have a specified time limit on their storage facilities, so check with your seller before investing.
Additional Read: 5 Golden Rules of Mutual Fund Investing for First-Timers
• Easy liquidity
Gold is already considered a highly liquid asset class. However, digital gold is even better. All you need to do is log into your customer portal, sell the digital gold available in your online account, and the payment will be directly credited to your bank account.
Ready to take the first step towards a golden future? Start with Tata Moneyfy's investment app! Open doors to hassle-free investing with easy-to-access digital gold. Digital Gold is convenient, secured, and cost-effective way of Investing in gold online. You can buy gold for an amount as low as Rs. 10 on our app and view your purchased gold in a locker online. You can also invest in mutual funds through Moneyfy app today!
Yes, buying digital gold online is safe when done through trusted platforms. At the same time, it is important to do adequate research on the credibility of various platforms to avoid fraud.
You can buy digital gold through mobile apps, financial platforms, or online stockbrokers.
Digital gold is a flexible investment option, offering easy buying and selling, small investment amounts, and secure storage. However, like any investment, its value fluctuates with market conditions, and a lack of physical possession exists. So, it is essential to evaluate the pros and cons before investing.
Digital gold allows you to buy small quantities of gold online through blockchain technology. Your investment is backed by real gold stored, and the value depends on the price of gold. It is a flexible and convenient investment option for those looking to benefit from the gold market without physical possession.
Digital gold represents physical gold stored in vaults, while gold ETFs are traded on stock exchanges and represent shares of gold funds.
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25 October 2024
8 mins read
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