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Gold is widely considered as one of the safer investments in the market. It acts as a durable store of value and a hedge against inflation. Investors usually turn to gold when there is fear in the market or when they expect stock prices to go down [1].
Digital gold has been gaining popularity amongst millennials’ investment options as they are enchanted with exploring new digital investment options. The Covid-19 pandemic has convinced the youth about the criticality of technology and investment, and digital gold is the blend of both. This article will discuss digital gold and how one can buy digital gold in India.
What is Digital Gold and How Digital Gold Works
Beginners can buy digital gold online, which is a method to accumulate pure gold in parts anytime and anywhere. This works even with the smallest amount of investment. Digital gold enables investors to buy gold without worrying about the purchase’s purity, safety, and storage issues.
Every gram of digital gold is purchased and backed by actual physical gold. The physical gold is set aside in an allocated vault by the vendor, who acts as its custodian. The amount of physical gold that the vendor holds is insured. When the buyers sell the digital gold, the amount will be deducted from the storage.
Beginners buying digital gold must ensure they buy from authorised agencies or sellers to avoid buying tempered gold.
Difference Between Digital Gold and Physical Gold
| Digital Gold | Physical Gold | |
| Investment cost | Pay to purchase the digital gold only and no making charges are added. | Maker will add a nominal making charge which ranges between 5% to 20% [2]. |
| Liquidity | Digital gold in India is available with utmost liquidity. The digital gold can be bought or sold via any digital portal you choose and can be traded in real-time. | Since physical gold is a physical product, disposing it usually takes time. Your money plus the appreciation amount cannot be recovered in real-time. |
| Quantity | Certain investment avenues allow you to buy digital gold for as little as INR 1. | The lowest quantity of physical gold you can purchase is a gold coin that is worth one gram. |
| Purity or quality of gold | Purity of the gold is guaranteed as it represents certified 24k gold of 99.99% purity. | Purity of the gold is not guaranteed as it depends on the genuineness of the selling jeweller. The gold quality also tends to differ from city to city and jeweller to jeweller. |
| Transparency | Purchasing digital gold is a well-regulated and stringently documented process, with no scope for adulteration. | Only a few brands can provide a certificate of authenticity. Some unbranded jewellers are selling tampered gold as well. |
How to Buy Digital Gold
Digital gold is offered by online platforms and in diverse types. Below are some methods to buy digital gold.
Gold Exchange-Traded Funds (ETFs)
- A gold ETF is a collection of funds with gold as the underlying asset. These gold ETFs can be traded regularly during market hours, just like a regular stock. When buyers buy gold ETFs, they do not own the physical commodity. The buyer will instead hold small quantities of gold-related assets. This gives the buyer access to gold through smaller investment positions.
Sovereign Gold Bonds (SGBs)
- SGBs are government securities issued by the Reserve Bank of India (RBI). The SGBs are denominated in grams of gold, with one gram of gold equal to one unit of the bond, and one can buy from as low as one gram to a maximum of four kilograms. The bonds are also tradable on stock exchanges, giving them a liquidity option. The SGBs also offer an interest rate of 2.5% fixed per annum on the initial purchase amount [3]. Like new equities being announced by companies, the RBI also announces the SGBs issuance, and the public can apply to buy.
Multi Commodity Exchange (MGX)
- The MCX is India’s first listed commodity derivative exchange that facilitates online trading of commodity transactions. Traders using the platform can trade gold through futures and options. The platform also allows traders to hedge their position using gold. Gold can be sold on the MCX for as low as one gram and up to one kilogram [4]. For beginners, it is advisable to understand how trading works prior to making a commitment to trade gold futures or options.
Digital Gold Wallet
- Digital gold wallets have been introduced to allow buyers to buy digital gold from several providers within the payment application—popular payment wallets such as Paytm, Google Pay, and PhonePe offer such services. The payment wallet applications come with a secure Gold Locker, where all the gold bought or sold will be stored [5]. These companies usually hold the gold within MMTC-PAMP fully insured lockers [6]. Buyers can purchase digital golds for as low as INR 1 in the gold wallet. Digital golds are generally predefined and can be bought and sold anytime through digital gold wallets.
Why Consider Digital Gold
Digital gold allows buyers to buy as much or as little as they want. Beginners who have just started buying digital gold can begin by buying in tiny amounts. In addition, digital gold comes with hassle-free storage but provides the same investment return. Beginners do not have to worry about their gold being stolen, as most safe lockers of the company they bought from are fully insured.
Digital gold is also not affected by tampering of any form. SafeGold offers 99.5% purity, while MMTC-PAMP offers 99.9% purity. Beginners will not have to worry about the gold they purchased having been tampered with. Only some jewellers’ brands can provide a certificate of authenticity for physical gold.
Flexibility is one of the advantages when it comes to trading digital gold. It allows anyone to buy and sell digital gold online at any time of the day. For a beginner, this helps save time without finding a physical store that sells gold with a certificate of authenticity. The digital gold price is also constantly determined on a real-time basis without any deduction due to depreciation. Beginners will not have to worry about storing the physical gold properly without depreciating its value.
Beginners can open a demo account with Vantage and begin buying digital gold with Vantage through gold CFDs on ETFs such as the SPDR Gold ETF (GLD), one of the largest physically backed gold ETF in the world [7].
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- “Has Gold Been a Good Investment Over the Long Term? – Investopedia”. https://www.investopedia.com/ask/answers/020915/has-gold-been-good-investment-over-long-term.asp . Accessed 8 Sept 2022
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- “Revolutionise Your gold – Weighing Digital Gold vs Physical Gold – Paytm”. https://paytm.com/blog/digital-gold/digital-gold-vs-physical-gold/ . Accessed 8 Sept 2022
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- “Frequently Asked Questions – Reserve Bank of India”. https://m.rbi.org.in/scripts/FAQView.aspx?Id=109 . Accessed 8 Sept 2022
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- “ Gold Leaflet – MCX”. https://www.mcxindia.com/docs/default-source/products/bullion/mcx_gold_leafletaede2c4757fb64e3bdfdff00007acb35.pdf?sfvrsn=35254891_4 . Accessed 8 Sept 2022
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- “Digital Gold Wallets: A Gold Revolution – TaxGuru”. https://taxguru.in/finance/digital-gold-wallets-gold-revolution.html . Accessed 26 Oct 2022
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- “Why Gold Buyers trust MMTC-PAMP Digital Gold – MMTC PAMP”. https://www.mmtcpamp.com/digital-gold . Accessed 26 Oct 2022
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- “SPDR Gold Shares – State Street SPDR Global Advisors”. https://www.spdrgoldshares.com/ . Accessed 8 Sept 2022
