Physical or digital gold: Which glitters the most?
Gold has always been a traditional and trendy investment instrument in India. Women love to buy jewellery and it becomes ‘auspicious’ to do so when festivities are around the corner. To boost demand, gold jewellers offer some tempting freebies or discounts.
Take a look at the figures: Total investment demand for gold in India in Q1 2021 increased by 34 per cent to 37.5 tonnes compared to Q1 2020. Even with the emergence of other investment options like mutual funds, cryptocurrency and stocks, the hunger for gold does not seem to diminish.
As digitalisation took over, it introduced a new way to invest in gold. Digital Gold is a relatively new concept in India. Most women love to wear their jewellery and are loathe to invest in the precious metal in a digital form. Even as an investment strategy, digital gold does not seem to appeal to women. If you are one among them, then keep reading. Let me break the pros and cons of both — digital gold and physical gold.
What is digital gold?
Digital gold is an online method to invest in physical gold. You can buy or sell the gold virtually without holding it physically. When you invest in digital gold, you can keep the gold in an electronic form, and what’s more, the gold is kept safe in insured vaults for you.
Investing in digital gold
With the advancement of technology, digital gold has provided investors with new opportunities. It is great for the investor as she can reap the benefits of investing in gold and have the option of receiving easy physical delivery.
Advantages of investing in digital gold 1. Flexibility:
You can start investing in digital gold in minimal amounts, as low as 1 rupee
2. Authenticity: Digital gold ensures the authenticity and purity of the gold as it represents only certified 24 karat gold of 99.99 per cent purity.
3. Safety: You can stop worrying about the security of your gold. It is stored safely and is 100% insured.
4. Physical delivery: You have the choice to either keep your gold in electronic form or ask for physical delivery, whenever you need it. 5. No additional costs: Digital gold does not require any making charges and holding costs. It is securely held in insured vaults and represented in your ewallet.
Disadvantages
I No official regulating body: Currently, no official regulating body like SEBI or RBI is appointed to look after the workings of digital gold.
I Delivery and other charges: When you exercise an option for physical delivery, you might be charged a delivery fee. Other fees might include making charges if you wish to get your gold in the form of jewellery.
What is physical gold?
It is gold in physical form. You can buy or sell the gold through authorised gold dealers. In this case, the security and storage responsibility lies on you.
Investing in physical gold
Generally, people buy physical gold for consumption. It is also a popular tradition to buy gold on auspicious occasions.
Advantages
1. Direct transactions: You can directly buy and sell gold through trusted gold sellers. There will be no intermediary or third party involved.
2. Physical possession: Most women treasure gold and wish to possess this precious metal. You have the freedom to keep and use the gold when it is in physical form.
3. Inheritance: It is a tradition to pass on the family’s gold to the next generation, which is mainly in the form of ornaments or jewellery.
Disadvantages 1. Additional costs applicable:
Making charges for ornaments can alone be in the range of 5 per cent to 20 per cent of the base price of gold. You may also have to incur storage costs to keep the precious ornament in gold secured.
2. Purity may vary: Unlike digital gold, physical gold might not give you the purity of 24K gold. Sometimes, it can also get difficult to check its authenticity.
3. Investment amount: You can buy physical gold in multiples of grams like 1 gm, 5 gm, 10 gm, and so on. Hence, you need at least a minimum of Rs 5,000 to start investing.
4. Security issues: The responsibility for the safety of the gold lies with you, and it can get you constantly worried about its security.
Ready to make a choice?
Your investment objectives and needs will help you make a better choice between physical and digital gold. Digital gold will help you instantly buy and sell the gold without holding it, whereas physical gold will be helpful for utilities like jewellery and ornaments. That said, remember to consider all the aspects before you choose your investment avenue.