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Digital Gold vs Physical Gold: Which is a Better Investment Option?


Gold - a form of investment, fascination and some might even buy to maintain their status. Gold has been the most preferred form of investment for people over the last 100 years. Any form of gold - jewelry, coins, biscuits, etc, gold has always been placed in high regard due to its auspicious significance. However, times are changing and with the advent of technology, the whole world is inclined towards digitalize forms of investment and gold is no exception. In this article, we will delve deeper into Digital Gold vs Physical Gold investment.


What is Digital Gold?

Among the various methods and forms of gold investment, one that has become famous in no time is digital gold. Digital gold is an alternative to physical gold investment available to investors. It has proved to be the most efficient and cost-effective way of investing in gold.

Digital Gold vs Physical Gold: Which is a Better Investment Option?

Who Provides Digital Gold and How to Buy it?

In India, it is offered by certain selected companies that are:

1. Augmont Goldtech Pvt. Ltd.

2. MMTC-PAMP India Pvt. Ltd - A joint venture between state-owned Metals and Minerals Trading Corporation of India (MMTC) Ltd and Swiss firm MKS PAMP


3. Digital Gold India Pvt. Ltd with its SafeGold brand.

Digital Gold is made available to investors by the above companies through various online platforms and e-wallets. The most interesting thing about digital gold is, investors can buy it from as low as Rs. 100, which has contributed towards the popularity of this product in the market.

Each unit of digital gold is backed by 24K 99.9% purity of gold. The buying and selling happen online at market prices which ensures complete transparency in the transaction.

Benefits of Investing Digital Gold

When compared to physical gold investment, digital gold has a lot to offer in terms of benefits. Some of the benefits of digital gold investment are:

No concerns about storage -Digital gold investment doesn't ask you for additional storage or carrying costs. Once you have invested, there is no need to worry about the safety of gold as it is stored by the trading companies in a safe vault in the investor's name.

Investment can be made in small amounts: Investors can start investing with small amounts of money in digital gold. With the privilege of no minimum purchase limits, one can consider digital gold for small investments.

Quality: Only 24 karat gold is possessed by the investor and the quality is never compromised. Hence, no need to be concerned with the protection or purity of the gold.

Redemption: The redemption process of Digital gold is quick and easy. One can redeem it in physical gold coins or bars. Also, investments can be easily cashed out without any hassle.

Loan against investment - Digital gold can be used as collateral for availing loans
Investment tracking is easy: One can easily track the investments through online platforms (apps or websites).

Helpful in diversifying your portfolio - Indeed, it is a good investment option for those who want to diversify their portfolio.

Advantage of price movements: Real-time gold rates are offered by these digital platforms. Hence, one can take advantage of the price movements and make purchases.
However, there are certain downsides of digital gold investment such as charges by trading platforms that range from 2%-3% as a management fee and no regulatory authority. Also, there is a long duration holding period after which an investor has to sell the gold or convert it into physical gold. However, compared with physical gold, digital gold investment is a much quicker and convenient form of investment.

What is Physical Gold and How is it Purchased?

Physical gold investment is the traditional form of investment in India. This yellow metal is usually bought for consumption purposes and is purchased in the form of jewelry, gold coins, and biscuits. It can be bought directly from a jeweler or a bank with no involvement of an intermediary.

Usually, the physical gold purchase is kept confidential, unlike other forms of investment. However, it is advisable to keep all the purchase-related receipts safely for income tax purposes. The minimum investment in physical gold is high. There is a higher minimum investment in physical gold than digital gold owing to the high market prices. One major advantage of investing in physical gold is liquidity. This yellow metal is accepted in exchange for cash. Thus it can be liquidated anytime, anywhere in the world. Having said that, keep in mind that the price of gold varies from dealer to dealer and the resale value is usually lower than other forms of gold investment.

Advantages of Investing in Physical Gold Investment

Inflation-Proof - Physical gold is considered to remain unaffected by inflation. For example, you can purchase gold today, sell it in the future and still compensate for the changes.

Always in demand - Gold demand has always been on the higher side. Mugging up the history, it can be easily found that metal has always been in demand. Even during a crisis, it can be sold easily.

Loan - Investors can avail loans against physical gold investment.

Downsides of Investing in Physical Gold

Storage cost - The cost of storage and carrying of gold is higher.

Making charges - Apart from the purchase cost, physical gold also have high making charges applicable.

Security - Another major drawback is there is always a risk of theft with physical gold.

Wealth tax - For gold purchases above 30 lakhs, one has to pay a wealth tax.

Physical Gold Vs Digital Gold - Which one should you go for?

Both digital gold and physical gold investments have their pros and cons. The choice of investment depends on the investor and the investment objective, risk factor, etc. For example, if someone is looking to purchase gold just for investment, he/she can invest in digital gold instead of physical gold.

However, as mentioned earlier also, digital gold is not regulated and has a maximum years limit after which it has to be sold or converted into physical form. In these cases, physical gold is a good investment alternative. But one thing to remember is that be it digital gold or physical gold, around 10%-20% of gold in the portfolio is considered healthy. This will help in the diversification of the portfolio and also act as a hedge against volatility, currency risk, and inflation risk.

Disclaimer: This is a partnered post.
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