What is Digital Gold Investment?
In the era of digitalization, the need of the hour is to become tech-savvy. The investment mindset of the people in this era attracts investors to invest in the yellow metal in the digital form. The young generation is looking forward to investing in digital gold that gives high returns. Holding gold in the electronic form removes the hindrances linked to the safety of gold. Various companies are shifting their way from traditional gold investment options to digital gold investment options. The article gives a complete guide to digital gold investment. It is also known as an E-gold investment.
What is Digital Gold Investment?
Digital gold is an online method of buying and investing in physical gold. It is the new version of investing in regular gold without holding it. Digital Gold investment is a process through which an investor can invest in gold virtually by using their smartphones. It can be bought online and is stored in insured vaults by the sellers on behalf of their customers. As low as ₹1 amount of gold can be purchased digitally. The gold quality offered digitally is 99.99% pure or 24k gold.
Other Types of digital gold Investment
Let’s discuss another type of gold investment option which you can invest in digitally or online:
Gold Mutual Funds- Gold mutual funds are one option for investing in digital gold. For this, the investor can purchase the shares of mutual funds gold and add it to their portfolios. The price of an investment will be the market price of the gold. The companies dealing in gold mutual funds investment would charge minimal charges for buying and managing the mutual funds.
Gold ETFs– Gold Exchange Traded Funds(ETFs) are a simple way of investing in gold online by buying and selling gold over stock exchanges.
SGBs- Sovereign Gold Bonds are government securities denominated in grams of gold. The Reserve Bank of India issues these bonds on behalf of the Government of India. They are the best alternatives for holding physical gold as they have sovereign guarantee and 2.5% interest on face value of bond.
Pros of investing in Digital gold
- Easy to track- Once an investor invests in digital gold, it is easy to access it anytime and from anywhere. Hence, it is easy to track digital gold investments.
- Safe investment- As digital gold is kept in vaults by the sellers, this investment option proves to be a safer investment option as there is no risk associated with robbery and security issues.
- Liquidity- Digital investment in gold is highly liquid. Investors can sell it at their convenience anytime of the day at market rates. It can be bought and sold 24*7*365.
- Accessibility– Investors can invest an amount of as low as ₹1 into gold digitally. Therefore, it can be accessed by anyone.
- Genuine investment- Digital investment in gold is genuine as there is an assurance of purest gold quality. The gold is certified by government-licensed agencies.
- Collateral for loans- Digital gold can be used as collateral against loans.
- Physical delivery- If an investor has invested in digital gold, they can at any time opt for it physical delivery at their doorstep.
- Gifting– Digital gold can be gifted to your family and friends by simply transferring it to them.
Cons of investing in Digital gold
- No regulatory body- No official regulatory body such as RBI or SEBI regulates the sale and purchase of gold digitally. Therefore, it is pretty risky to invest in digital gold.
- Minimal fee- While delivering the gold to the doorstep of the investor, the companies may charge some fee for it.
- Limiting the maximum amount- Some platforms have limited the maximum amount of investing in digital gold to ₹2,00,000. Hence, the investor cannot buy gold of more than ₹2,00,000 digitally.
Comparing Digital Gold with Physical Gold
|Basis||Digital Gold||Physical Gold|
|Risk||It is safer than physical gold as it is kept in insured vaults by the seller, however there is regulatory risk.||There is a risk associated with robbery of physical gold.|
|Authenticity||Golds here are authentic and genuine as these are 24k assured gold.||Physical gold provides limited authenticity.|
|Making Charges||It does not include any making charges.||Jewelers charge making charges on purchasing physical gold jewelry.|
|Minimum amount of investment||An investor can invest as low as ₹1 amount of gold digitally.||In physical form gold is purchased in grams, not in amount for as low as ₹.|
- The following three companies in India offers an option for digital golds investments-
- MMTC-PAMP India
- Augmont Gold Ltd
- Digital Gold India
- Other than this, platforms such as Paytm and Phone Pay etc. also provide digital gold investment options.
Misconceptions about investment into digital gold
Certified over paper- the most common misconception of buying gold digitally is people assume that buying gold online is only certified over paper, i.e., no real ownership is associated with these golds. But actually, every unit of gold the investor has purchased, real gold is kept safely in the vaults by the seller on behalf of the investors. However, its very difficult to validate the same.
Questions over purity of gold- The general myth of digital gold is that it is not pure. But digital gold is as pure as 24k of gold, i.e., they are 99.99% real gold if you get them converted and take the delivery.
Extensive Documentation- People assume that buying gold online involves immense documentation procedures; hence, it is lengthy. But in reality, digital gold investment involves only a few simple steps of investing in gold.
Process to invest in Digital Gold
Step1 – Go to one of the platforms that provide options to invest in digital gold.
Step2- Select the ‘Gold Vault’ option.
Step3- Enter the amount of your digital gold investment.
Step4- Make the required payments through a debit, credit card, or net banking option.
Step5- Gold would be credited to the insured Gold Vaults by the sleer on behalf of the investor.
Step6- At any time, the gold can be sold by the investor or the investor can opt for the physical delivery of the gold.
Taxation of Digital gold Investment
|Capital Gains||Holding Time||Tax Rate|
|Short-Term Capital Gains||Held for less than 3 years||According to the applicable tax rate.|
|Long-Term Capital Gains||Held for more than 3 years||Taxed @20% with indentation benefit.|
Digital gold investment is a way to invest in the yellow metal in the electronic format. It is the new-age version to invest in gold. E-gold investments help the investors to hold the gold in the electronic vaults provided by the sellers. The companies dealing in this type of investment option guarantee the purity of the gold and also ensure the safety of the gold. There are many ways through which the investor can invest in gold digitally like- Gold ETFs, SGBs etc. It serves as a superior option than physical gold investment. The taxes on the capital gains arising from digital gold investment is distributed into short and long-term gains and is charged accordingly. Despite the advantages of digitally investing in gold, there are a few disadvantages of this option, like there is no authorized regulating body to look into the matter.
Frequently Asked Questions(FAQs)
What happens to the gold, if the investor loses its smartphone?
The digital gold will be safe even if the investor loses its smartphone. Since the digital gold is registered in your name and monitored by the sellers, it is always kept securely in the vaults.
Who should buy digital gold?
Investing in yellow metal digitally will suit those who cannot afford to buy large quantities of gold or cannot buy physical gold.
What is the purity of gold?
Digital gold is 99.9% pure, i.e., it is 24k gold.
What is the lock-in period of this investment?
The investor can buy and sell the gold anytime and anywhere at their convenience.