Indians have always been sentimentally attached to gold. It is considered auspicious for festive occasions and family celebrations like weddings, anniversaries, religious worship of idols, the birth of a child and so on. Gold is the only metal that occupies a special place in the heart of Indians right from Kashmir to Kanyakumari in the country. Besides the above, Gold is considered to be an important milestone in financial planning. It protects one during rainy days. In the modern era, digital gold is becoming quite popular with its demand surging especially among young investors. Now, the question that comes to mind is- what is digital gold and how does it differ from physical gold? Today’s post will delve into this topic and beyond so that by the time you finish reading it, you will know what digital gold is along with its key benefits.
An Overview Of Digital Gold
Digital gold is the same as physical gold and there is “actually” no difference between the two. In the former case, you just need to invest in gold in its digital format. You can easily buy and sell digital gold in the following forms as and when the need arises and it brings you the same returns as physical gold when sold.
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Digital Gold Organizations
There are organizations that enable you to trade in digital gold like PhonePe, Google Pay and Paytm. Here, you get a platform on the web or a mobile app that supports digital gold trading for investments as low as one rupee. This gold is stored in insured lockers and depositories looked after by esteemed providers like MMTC-PAMP India and SafeGold in India. For instance, Google Pay keeps its gold with MMTC-PAMP India.
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Gold Exchange Traded Funds or ETFs
These funds are similar to mutual funds traded in the equity market. One unit represents one gram of gold with a purity value of 99.5%. The gold is kept in depositories and its underlying value depends on how the ETFs perform in the market. There are several funds for you to choose from for buying gold ETFs.
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Sovereign Gold Bonds or SGBs
They are debt instruments offered by the Reserve Bank of India. You can buy gold in quantities as low as one gram. RBI opens this series of investments for specific time periods similar to the mode that public and private companies do for a pre-defined period to subscribe to their shares
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MCX Gold Contracts
Trading of gold is done on India recognized The Multi Commodity Exchange or MCX. They are predominantly contracts based on derivative futures and options. You can hedge, trade and speculate gold for short-time spans. They are ideal for investors with experience and the trades are executed under supervision. The minimum quantity for trading gold is one gram and options here are gold mini, gold, gold guinea and gold petal. They are some of the popular gold products that are available for investors on MCX.
Benefits of Investing in Digital Gold
Investing in digital gold has numerous benefits. Let us take a look at some of them below-
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Purity Of Gold
The highest purity of gold is 24-carat and when you buy digital gold, you get the same purity levels. This is a big advantage over investing in physical gold. Not all physical gold sellers will give you the same purity when it comes to ornament purchases online. There are several sellers who regularly resort to fraudulent practices and other irregularities that compromise on the quality and purity of gold sold in the market. Many consumers are not aware of this widespread practice and so if you wish to purchase gold at its highest purity, investing in digital gold is a prudent choice.
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Safe From Loss And Thefts
Digital gold is generally kept in demat accounts keeping it safe and less prone to theft or loss. Storing gold in demat accounts is much cheaper than the storage of physical gold. The latter needs to be secure in either a vault or safe and this invites high locker fees and insurance costs.
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24/7 Liquidity
Digital gold can be purchased and sold in just a few seconds, anytime and from any place. You will not get the same convenience with physical gold. You should buy it from government sellers who sell customers hallmarked gold.
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No Deterioration
Physical gold is subject to a lot of wear and tear especially if worn in your daily life. The same does not take place with digital gold as since it is stored in the digital format, it does not undergo any sort of wear and tear for you to worry about.
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Ideal For Everyone
When it comes to buying digital gold, it is convenient for everyone from every income level. Since you can buy gold as low as 1 mg, it is easy for you to invest in this asset without burning a hold in your pocket. Physical gold, mostly bought as ornaments, bars or golds are not always simple for everyone to buy especially if they have a limited or tight budget.
Are There Any Downsides Of Digital Gold?
Well, there is just one downside if you are sentimentally attached to gold. Digital gold lacks the emotional touch that physical gold has. It is this same psychological attachment that compels buyers to invest in physical gold especially for Indians. Physical gold is an essential component in financial planning and it is popular as heirlooms as well that is passed down from one generation to another.
Therefore, when it comes to buying digital gold, it does have salient benefits and can be invested in for building wealth. It is an asset accessible to people from all income levels and can be safely stored without the fear of theft or loss at all!
