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Digital Gold: Safeguarding Your Wealth in Times of Uncertainty

Digital Gold: Safeguarding Your Wealth in Times of Uncertainty

Digital Gold
Table of Contents

Gold is a popular investment choice for everyone. Many important celebrations are commemorated with the purchase of gold. Buying gold coins and biscuits was standard practice. However, they carried the risk of being stolen, as well as additional expenses and fees. In the modern era, digitalisation has replaced globalisation. It's hardly unexpected that gold may now be acquired online, reducing the danger of theft and associated storage expenditures. This article discusses digital gold, how it works, the advantages of digital gold, how to invest in it and more.

What is Digital Gold?

Gold has grown at an average of 11% in 20 years compared to mutual funds and fixed deposit investments. Digital gold is an investment that allows individuals to purchase, sell, and keep gold online without tangible assets. Instead of dealing with actual gold, investors can acquire digital gold reinforced by physical gold stored in secure vaults. It implies the value of digital gold is precisely proportional to the price of gold, offering the same investment opportunities as real gold. The procedure is easy and quick, with transactions completed in only a few clicks.

An investor's purchase of one unit of digital gold is backed by 99.9% 24K pure gold, providing purity assurance with each transaction. Gold is sold in the digital marketplace at the current price of physical gold.

Types of Gold Investments

Here are five types of gold investments with their minimum investment needs, risks, and costs, aiding investors in uncertain times.

  1. Physical Gold

  2. Digital Gold

  3. Gold ETFs

  4. Gold Mutual Funds

  5. Sovereign Gold Bonds

Type of Gold Investment digital gold vs physical gold Minimum Investment Amount (INR) Key Risks Key Costs (Approx)
Physical Gold ₹6,000 (1gm gold coin) Theft, Purity Issues, Loss during manufacturing Design/Making Charges (10%), Insurance/Storage charges (3-4% annually), GST (3% of purchase price)
Digital Gold Starting at ₹1 Lack of regulatory oversight GST (3% of purchase price), Spread (approx. 6%)
Gold ETF ₹50-₹100 (based on the price of one unit of ETF) Volatility of gold prices Total costs of 0.5% to 1% annually inclusive of Expense Ratio, Demat Account Charges, Brokerage
Gold Mutual Funds Starting at ₹100 Volatility of gold prices Total costs of 0.6% to 1.20% annually, which include: 0.5% to 1% as Gold ETFs + (0.1% to 0.2% for managing the Gold)
Sovereign Gold Bonds ₹5,000 (price of 1 gm of gold) Risk of sovereign default by the Government of India No visible expenses, Fixed interest of 2.5% annually credited directly to the investor’s bank account
Type of Gold Investment digital gold vs physical gold Minimum Investment Amount (INR) Key Risks Key Costs (Approx)
Physical Gold ₹6,000 (1gm gold coin) Theft, Purity Issues, Loss during manufacturing Design/Making Charges (10%), Insurance/Storage charges (3-4% annually), GST (3% of purchase price)
Digital Gold Starting at ₹1 Lack of regulatory oversight GST (3% of purchase price), Spread (approx. 6%)
Gold ETF ₹50-₹100 (based on the price of one unit of ETF) Volatility of gold prices Total costs of 0.5% to 1% annually inclusive of Expense Ratio, Demat Account Charges, Brokerage
Gold Mutual Funds Starting at ₹100 Volatility of gold prices Total costs of 0.6% to 1.20% annually, which include: 0.5% to 1% as Gold ETFs + (0.1% to 0.2% for managing the Gold)
Sovereign Gold Bonds ₹5,000 (price of 1 gm of gold) Risk of sovereign default by the Government of India No visible expenses, Fixed interest of 2.5% annually credited directly to the investor’s bank account

How Do Digital Gold Investments Work?

One can put money in digital gold using the e-wallet services. Investors can invest in digital gold through various NBFCs. KreditBee allows investors to purchase 24K digital gold. It’s possible to start with just ₹10 and save up in small amounts over time. When an investor buys gold using the digital gold platforms, the trading company stores an equivalent amount of actual gold in the investor's name in the vault. As a result, investors just need to invest in digital gold on these platforms, and the trading companies will handle the rest.

Which Companies Offer Digital Gold Investments?

Only three companies sell gold online in India. However, companies like KreditBee make it easier to purchase and trade digital gold.

Augmont Gold Ltd., MMTC-PAMP India Pvt. Ltd. MMTC Ltd., a state-run company, and Swiss firm MKS PAMP formed a joint venture to create Digital Gold India Private Ltd, which operates under the 'SafeGold Brand'.

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Benefits of Digital Gold

There are various advantages of digital gold. Here are some of the main advantages:

Security From Market Volatility:
Digital gold investment Compared to other high-risk investments, gold prices are more likely to hold steady or even go up during an economic downturn, protecting against market volatility. Nonetheless, gold has been one of the highest-returning assets. As a result, digital gold is a safe long-term investment.

Quality Assurance:
Investing in digital gold equates to 24K of 99.9% pure gold, ensuring excellence with each digital gold price transaction.

Affordability:
Investing in gold might be difficult due to the high cost of a 1-gram coin plus manufacturing costs. However, digital gold allows anyone to deposit modest sums of money, as little as ₹1, making it an affordable digital gold price and a key investment choice for individuals.

Inflation Barrier
Digital gold is an effective inflation barrier. Because the value of gold usually grows with inflation, investing in digital gold can assist in increasing the investment value.

Ease of Trading:
Digital gold is easy to trade. Buying and selling digital gold is as simple as buying and selling stocks, making it an attractive choice for people looking to invest in gold. Digital gold also operates at real-time rates and gives investors a clear idea of the market.

Accessibility:
Digital gold is readily available through digital marketplaces. You can access it from anywhere globally, which is a simple choice for investors to purchase from the comfort and safety of their own homes rather than searching for physical vendors.

Ease of Storage:
Digital gold assets are securely held in an encrypted digital vault without physical storage or additional fees. The merchant bears the obligation for safety.

Simple Redemption and Sale:
Investing in digital gold can be readily redeemed for physical gold at any moment, or the investment can be sold for market value.

Cons of Investing in Digital Gold

The following are the cons of investing in Digital Gold:

No Passive Income:
Digital gold does not provide passive revenue. In other words, one will only get a return if one sells their gold. There is no interest paid to investors.

Investment Limit:
The maximum investment amount on most digital gold platforms is ₹2 lakh.

Other Charges:
The digital gold platforms that sell gold online charge between 2% and 3% in administrative fees, storage charges, and insurance. If one wishes to convert digital gold to real gold, costs will apply, which are determined by the quantity.

Who Should Invest in Digital Gold?

Anyone who wants to invest in gold but cannot do so because of the costly investment or storage requirements for real gold can do so easily with digital gold. Investment in digital gold can start as little as ₹1, and transactions via mobile phones make gold easily available to anyone.

Conclusion

Gold is an asset with a lasting value. It is more than just an investment as it has significant emotional and social significance. The purchase of gold is customary on auspicious occasions. Investing in digital gold helps to diversify an investment portfolio and hedge inflation, currency, and market turmoil.

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