Over the past few years, digital gold (another term for cryptocurrency) and digital gold investment have been gaining significance. Gold has always been considered one of the most precious metals in the world and one of the best investments one could make. Now, digital gold has been deemed the digital equivalent of the metal. Digital gold is an asset based on blockchain, allowing investors to hold the metal without owning any physical gold. In this article, we take a deep dive into what digital gold is, its benefits, and how to determine if this is the right investment for you.
Digital gold refers to the modern way of investing in gold without physically owning it. Through Blockchain technology that generates digital gold, individuals can buy, sell, and store gold securely in digital form.
Since the value of digital gold is linked the price of the physical gold, it is a secure and reliable investment options. Investing in digital gold provides you with the security of real gold ownership while getting access to cryptocurrency trading.
In short, yes. In fact, if you want to invest in gold, this is perhaps the best option. Digital gold is 99.9% pure 24K gold which does not come with the burden of storage. You can invest in this gold option online through a UPI transaction or internet banking. However, this does not mean that no equivalent physical gold is reserved in your name. When you buy gold in digital form, the seller will stock the same in their secure vaults, relieving you of the danger of theft or accidental loss.
Investing in digital gold offers many benefits, including –
This is perhaps the most important benefit. Investing in digital gold relieves you from the fear of theft or accidental loss that comes with storing physical gold in a locker at home.
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In the case of physical gold, it is crucial that you buy hallmarked gold, or you may get duped into purchasing counterfeit metal. But this is never the case with digital gold, mainly because they are certified by government agencies.
Physical gold is anything but cheap. However, you can purchase digital gold for an amount as low as Re. 1! If you think this is an unlikely amount for such a precious metal, there's a reason - purchasing digital gold allows you to invest in fractional gold; plus, its price is determined by the wholesale market rate, not other factors such as geography or even a pandemic, making it highly affordable.
If you were to opt for a bank locker to store physical gold, you'd need to pay monthly rent for as long as you'd use the locker. Thankfully, your digital gold investments stay secure without additional storage costs.
Remember that most sellers have a specified time limit on their storage facilities, so check with your seller before investing.
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Gold is already considered a highly liquid asset class. However, digital gold is even better. All you need to do is log into your customer portal, sell the digital gold available in your online account, and the payment will be directly credited to your bank account.
Digital gold offers great flexibility and convenience of investment through various platforms, such as-
1. Digital gold platforms: Various online platforms allow you to buy, sell, and hold digital gold through a user-friendly interface.
2. Gold ETF: Gold ETFs (Exchange Traded Funds) offer exposure to gold prices without physically holding the gold. You can buy gold ETFs through the stock exchange.
3. Gold-linked Bonds: These financial products link their returns to the price of gold and provide a fixed income with the potential for great returns.
4. Mobile apps: Various dedicated mobile apps offer easy access to digital gold.
5. SIPs: Some platforms also allow you to set up SIP investments to invest in digital gold regularly.
6. Payment gateways: Several payment gateway platforms integrate digital gold investment to allow you to purchase digital gold online seamlessly.
7. Gold digital certificates: These certificates indicate ownership of a particular amount of gold stored in the secured vaults and are issued by financial institutions.
8. Gold-backed cryptocurrencies: Digital currencies backed by gold reserves are a unique new investment option that can be traded through blockchain platforms.
| Criteria | Physical/Solid Gold | Digital Gold |
| Form | Solid gold includes gold coins, jewellery, and bars. | Digital tokens or ETFs represent electronic gold. |
| Storage | Solid gold requires proper, secure storage and safekeeping. | Digital gold does not require physical storage. It is instead stored in digital wallets. |
| Accessibility | Physical gold can be challenging to access or transport. | Digital gold is easy to buy, sell, and transfer online. |
| Liquidity | Physical gold does not offer a lot of liquidity and requires many fees to sell. | Digital gold can be easily bought or sold and generally has low transaction costs. |
| Advantages of digital gold | Disadvantages of digital gold |
| Accessibility: Digital gold can be purchased easily through various financial platforms, mobile apps, and online wallets. This convenience makes digital gold accessible to everyone, including those who may not be able to visit traditional gold markets. | No Physical Access to Your Gold: Even though your investment is backed by real gold, you do not physically hold it, which might be a concern for some investors who prefer tangible assets. |
| Small investments: Digital gold allows investors to start with very small amounts, making it a flexible option for those who cannot afford to invest in large quantities of physical gold. This feature is ideal for people who want to build their gold portfolio gradually. | Price Volatility: Like physical gold, digital gold is not immune to price fluctuations. Gold prices can be highly volatile, influenced by global economic factors and market trends, leading to investor losses. |
| Liquidity: Digital gold is a highly liquid investment that allows investors to convert the investment to cash quickly and easily. | Storage and security: While digital gold eliminates the physical storage of gold, investors may still be concerned about the integrity and security of digital gold. |
| Transparency: Digital gold platforms provide transparent pricing and access to transaction records, boosting investor confidence. | Regulatory risks: Regulatory changes in the digital gold market can affect the accessibility and value of these investments. |
Taxation on digital and physical gold is different based on various factors-
Digital gold is subject to capital gains tax on sale. Investments held for up to 3 years are considered short-term and are taxed as per the investor's tax slab on redemption. If the investment is held for over 3 years, long-term capital gains are considered and taxed at 12.5%.
Additionally, the purchase of digital gold carries a GST of 3%.
Physical gold is also subject to capital gains tax and taxed similarly to digital gold. However, a GST of 3% is levied on the making charges for gold jewellery, in addition to the custom duty on imported gold.
Investing in digital gold is an attractive option for investors for many reasons. For starters, digital gold is less expensive than physical gold metal due to cheaper transaction expenses. It also has high liquidity and is easily accessible online. This allows buyers and sellers to interact with each other from the comfort of their own homes. Digital gold is also accessible to a broader audience of investors since it can be bought in smaller, more affordable quantities.
In India, many platforms allow investors to purchase digital gold. These include PhonePe, Paytm, Google Pay, and more. Countless online stockbrokers, websites, and trading platforms can also aid investors in purchasing digital gold. It is important to conduct thorough online research before investing in digital gold.
Cryptocurrencies are now referred to as digital gold due to their similarities with metal, including their limited supply, high value, and decentralised structure. While they are an excellent option for investors wanting to diversify their portfolios, they do come with unique risks. This is why it is crucial to take your time, conduct research, and ensure you understand their pros and cons before investing.
Yes, buying digital gold online is safe when done through trusted platforms. At the same time, it is important to do adequate research on the credibility of various platforms to avoid fraud.
You can buy digital gold through mobile apps, financial platforms, or online stockbrokers.
Digital gold is a flexible investment option, offering easy buying and selling, small investment amounts, and secure storage. However, like any investment, its value fluctuates with market conditions, and a lack of physical possession exists. So, it is essential to evaluate the pros and cons before investing.
Digital gold allows you to buy small quantities of gold online through blockchain technology. Your investment is backed by real gold stored, and the value depends on the price of gold. It is a flexible and convenient investment option for those looking to benefit from the gold market without physical possession.
Digital gold represents physical gold stored in vaults, while gold ETFs are traded on stock exchanges and represent shares of gold funds.
Yes, digital gold can be sold. In most cases, this can be done via the same platform the investor has used to purchase the digital gold.
Some lenders may offer loans, especially quick funding, with digital gold as collateral. However, you should check with your lender to determine if they offer loans against digital gold.
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25 April 2025
9 mins read
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