How Does Digital Gold Work?

Gold has been in use for much longer than any currency anywhere. And it has always been of great value to Indians. India is the largest importer of gold in the world today. And people have been investing in gold in various forms, like physical gold, gold ETFs, gold mutual funds, and sovereign gold bonds. Since the pandemic, another form of gold investment has gained popularity, which is digital gold. But let us first see what digital gold is.

What is Digital Gold?

Physical gold has its downsides. Purchasing physical gold comes with the concern about whether the gold is legitimate and pure. Then there are issues of where to store it safely. With the pandemic, visiting jewellery stores isn’t always possible.

Digital gold serves as a remedy to all such problems circling physical gold. You can buy it online and the seller stores it for you in insured vaults. And buying digital gold is convenient as you just need an internet connection to do it.

How Does Digital Gold Work?

Buying physical gold requires saving up a substantial amount of money and then purchasing it from a reputed jewellery store. If you want to buy jewellery, you will even need to pay the jeweller’s making charges. While digital gold allows you to invest in a relatively small amount. This makes digital gold an affordable investment for almost everyone.

Because of its liquidity benefits, gold is a preferable form of investment. Selling gold ornaments is rarely profitable. With ornaments, you incur a loss of the making charges. While with digital gold, your loss can be mitigated as you get to sell it at real-time market prices. Also, the process becomes faster as you do not need to look for a buyer.

Pros of Investing in Digital Gold

• Investing in small amounts is possible.
• It can serve as collateral for online loans.
• Storage of the purchased gold is safe and secure in insured vaults.
• Digital gold can be exchanged for gold coins or physical jewellery.

Cons of Investing in Digital Gold

• Platforms have a maximum investment limit for digital gold.
• There is no government regulating authority involved.
• Certain businesses only offer a limited time storage period. After that, you are required to either sell the gold or take physical delivery.

Final Thoughts

Digital gold provides a lot of benefits and advantages over physical gold. It has gained popularity, especially during the pandemic. But just like with its pros, there are certain downsides to it as well. It really depends on the requirements of the investor, whether they choose to invest in it or not.

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