We know that physical gold has many disadvantages. Among the various ways available to invest in gold, one that is becoming increasingly popular is digital gold. Are gold mutual funds and gold ETFs (exchange-traded funds) digital gold? No, though Sovereign Gold Bond, gold mutual funds, and gold ETFs are good alternatives to physical gold, it is not digital gold. In the case of digital gold, the companies purchase physical gold and store it under your name in secured vaults, that is #realdigitalgold. Often they simplify the process by allowing you to buy and sell gold through a mobile app. The purchase of digital gold has increased by 40-50% during the lockdown period. Through this article, we explain what is digital Gold? And how can one buy/sell it?
Buying Digital Gold is easy
Table of Contents
Why one should buy Digital Gold
Buying physical gold certainly has some disadvantages. There are issues of its purity, legitimacy, and one has to worry about safekeeping as well as storage since one wants to limit going outside during post-COVID-19 times.
Digital gold can be bought online and is stored in vaults for customers. Important information about, safety, security, costs, and pricing can be easily provided to the customer often through an App.
Gold mutual funds and gold ETFs are excellent alternatives to physical gold but they are not as efficient as digital gold. For instance, one has to pay charges such as expense ratio to the fund house, but there are no such charges in the case of digital gold.
Buying Digital Gold appeals to those who prefer investing in physical gold.
Digital Gold overcomes the issues of physical gold purchases mentioned. All one requires is the Internet, mobile phone and one can buy, sell, trade gold digitally anytime, anywhere, 24X7.
Advantages and disadvantages of Digital Gold
The table below shows the advantages and disadvantages of Digital Gold
Pros and Cons of Digital Gold
How to Buy Digital Gold?
You go to the website/app which offers digital gold investments such as Paytm, HDFC Securities, PhonePe, Groww etc. Many like Digital Swiss Gold (DSG) have their app on Google Play Store
Once you are on their platform, you need to follow steps:
- Create the account and complete the KYC process. This is required only the first time only.
- Enter an amount in Rs of gold you want to purchase.
- Pay using digital means including Credit Cards, Debit Cards and in some case other methods.
- Once the purchase is complete, Gold in your name gets stored in a secured locker/vault. You get a receipt of payment. Digital Swiss Gold (DSG) uses Blockchain technology to validate, track and audit transactions
- You can sell your gold whenever you want and get your money to your bank account
In India, there are various options for buying Digital Gold such as Augmont Gold Ltd, MMTC-PAMP India Pvt. Ltd (a joint venture between state-run MMTC Ltd and Swiss firm MKS PAMP). Digital Gold India Pvt Ltd which offers Safegold, DSG- Digital Swiss Gold (Jersey) Limited offers Digital Swiss Gold (DSG).
While buying Digital Gold one must try to pay the least cost. DSG saves up to 10% when compared to published Indian gold prices as it cuts out the middlemen and sources gold directly from Swiss refineries.
Link to buy Digital Gold from DSG is here,
Tax on Digital Gold
For tax purposes, investing in digital gold is treated like physical ownership of Gold. The amount of tax one has to pay depends on the holding period.
If one owns digital gold for 36 months or less, the returns from it can be classified as short-term capital gain or STCG and gains are taxed as per applicable tax slabs.
If one sells after 36 months of ownership, returns are considered long-term capital gains or LTCG. And gains are taxed at 20% with indexation.
The process of buying, selling, and storing gold is expensive and time-consuming. And it is hard to verify the authenticity of their gold. Digital Gold addresses all these issues and is cost-effective, easy, and safe to use. Buying Digital Gold appeals to those who prefer investing in physical gold.
Detailed blog post, Digital Gold is free from exchange rate manipulations and variations and allows the investor to easily trade throughout the world without actually touching physical gold.
As the market is unpredictable and volatile, especially post-corona, digital gold is a secure investment and a good way to protect yourself from market fluctuations and incur any loss.
Every gram of gold accumulated in your account is backed by real physical gold with your name in a safe vault by the seller. This means that you are at no risk at any time. Your gold is safe even if the app you invested from, disappears! You can even exit anytime you want. What other gold investment gives you more security and benefits in the long term than this? Just go for it.