Digital gold and physical gold offer distinct investment options with unique characteristics. Digital gold, accessible through online platforms, allows investors to purchase and own gold electronically, typically in fractional amounts. It offers convenience, liquidity, and accessibility, enabling seamless transactions and easy tracking of gold prices. On the other hand, physical gold refers to tangible gold assets like gold coins, gold bars, or gold jewellery, which investors can physically possess and store. While physical gold provides a sense of security and tangibility, it may require additional costs for storage and insurance. Understanding these differences is crucial for investors to choose the most suitable option based on factors such as investment objectives, risk tolerance, and preferences for liquidity and convenience. By evaluating these factors, investors can make informed decisions to diversify their portfolios effectively.
What is digital gold?
Digital gold refers to a convenient and accessible way of investing in gold through online platforms or apps. It allows individuals to purchase and own gold in electronic form, eliminating the need for physical possession or storage. Investors can buy digital gold in small denominations, making it affordable and flexible. The value of digital gold is linked to the prevailing market price of physical gold, providing a transparent and reliable investment option. Digital gold offers benefits such as ease of purchase, liquidity, and transparency, making it attractive for both seasoned investors and beginners. With digital gold, investors can participate in the gold market without the complexities associated with owning physical gold, offering a convenient and efficient way to diversify investment portfolios.
What is physical gold?
Physical gold refers to tangible gold assets in the form of bars, coins, or jewellery. Unlike digital gold, physical gold can be held, touched, and stored physically. It serves as a traditional and reliable investment option, offering a hedge against economic uncertainty and inflation. Investors can purchase physical gold from bullion dealers, banks, or jewellers, and store it securely in a vault or safe deposit box. Physical gold ownership provides a sense of security and ownership, allowing individuals to have direct control over their investment. However, it may require additional costs for storage and insurance. Overall, physical gold remains a popular choice for investors seeking a tangible store of value and a long-term hedge against market volatility.
Digital gold vs physical gold: Which is better?
Parameters | Physical gold | Digital gold |
Meaning | Purity of physical gold can vary and may not always be 99.5%. | Purity is guaranteed and consistent. |
Price | Prices for physical gold vary and are not uniform across locations. | Digital gold prices are uniform throughout the country. |
Investment | Investing in physical gold requires purchasing gold biscuits or coins in standard denominations, such as 10 grams, which demands a larger investment. | Digital gold can be bought and sold by weight or fixed value, allowing for more flexibility. |
Cost | Gold jewelry often incurs 20% – 30% additional making charges on top of the gold's total value. | Digital gold purchases incur a 3% GST. |
Storage | Physical gold needs to be securely stored at home or in a locker, which poses risks of theft or loss. | Digital gold is stored in a secure locker in the investor’s name, eliminating the risk of theft or loss. |
Taxation | Gains from physical gold held for less than three years are taxed according to the investor’s income tax slab rates. For gold held over three years, gains are taxed at 20% with indexation benefits. | Gains from digital gold are taxed similarly to physical gold: according to the income tax slab rates for holdings less than three years, and 20% with indexation benefits for longer holdings. |
Liquidity | Physical gold can be purchased from banks or jewelers and is exchangeable through jewelers. | Digital gold can be redeemed as coins, bullion, or converted to cash. |
Benefits of digital gold
- Hassle-free investment:Purchase and sell gold online from anywhere at any time.
- Secure storage:Eliminates the need for physical storage and security concerns.
- Flexibility:Buy gold in small denominations according to budget and investment goals.
- Liquidity:Easily convert digital gold into cash or redeem for physical gold.
- Transparency:Real-time tracking of gold prices and transparent transactions.
- Accessibility:Convenient access to gold investment opportunities for investors of all levels.
Benefits of physical gold
- Tangible asset:Physical gold provides a tangible form of wealth, offering a sense of security and stability.
- Liquidity:It is highly liquid, easily convertible into cash or other assets whenever needed.
- Inflation hedge:Acts as a hedge against inflation and currency devaluation, preserving wealth over time.
- Direct ownership:Offers direct ownership and control, eliminating counterparty risks associated with financial instruments.
- Portfolio diversification:Provides diversification within investment portfolios, reducing overall risk exposure.
- Intrinsic value:Holds intrinsic value and cultural significance, making it a timeless investment choice.
- Stability:Offers stability and long-term growth potential in investment portfolios.
Best ways to buy physical gold and digital gold
1. Physical gold:
- Purchase from reputable dealers: Buy gold from established banks or trusted jewellers to ensure authenticity and fair pricing.
- Check purity and certification: Ensure gold is certified with a purity mark and has been tested for quality.
- Secure storage: Store physical gold in a safe deposit box or a secure home safe to avoid theft.
2. Digital gold:
- Choose trusted platforms: Invest through reputable digital gold platforms that offer guaranteed purity and secure storage.
- Compare rates: Check the digital gold rate today on different platforms to get the best price.
- Understand safety: Verify that the platform follows stringent security measures—is digital gold safe? Ensure the provider offers secure storage and insurance.
Difference between digital gold and physical gold lies in ease of purchase, storage, and liquidity, making digital gold a convenient option for many investors.
