• 24 Feb , 2025
• Blog

Gold ETF V/s Digital Gold Which Is Better?

There’s no doubt that shiny yellow metal is deeply rooted in India’s investment culture.

But nowadays, digital gold investment is rapidly gaining popularity, especially among Gen-Z and millennials, due to its convenience and the ability to purchase small fractions of gold.

Digital gold has already secured its place in diversified portfolios (and in people's hearts too).

Around 90% of people now prefer investing in gold digitally. So, it is only expected that new and more innovative gold investment options will continue to emerge.

Digital Gold and Gold ETFs are among the most popular choices. But before jumping into the trend, it’s important to consider which option is right for you.

So here, we will compare Digital Gold vs. Gold ETFs to help you decide which one goes with your needs and goals.

What is Digital Gold? 

Digital gold is a modern and simple way to invest in gold. You don’t have to deal with the hassle of buying physical gold and the concerns of storing it safely.

This online gold investment option lets you buy and sell gold in small portions, starting from just Rs. 1 with assured 24 K gold of 99.99% purity. Every unit of digital gold purchased online is backed by physical gold stored securely in vaults.

This makes digital gold the most cost-friendly, safe, and convenient gold investment choice, no matter how much money you have for saving.

Digital Gold Advantages  

1. Accessibility and Convenience: You can buy and sell digital gold instantly online. There is no need to visit jewelry stores or banks. You can manage your investment anytime, from anywhere.
2. Fractional Ownership: You can buy small amounts of gold starting from just Rs. 1. This makes it affordable for everyone and offers flexibility in gold investment.
3. 100% Backed by Physical Gold: Your investment is linked to real gold stored securely in vaults.
4. Liquidity: Digital gold is highly liquid. You can sell it anytime and get cash at current market prices. And if you want to convert your digital gold into physical gold and get it delivered to your home anytime. But, your wallet must have at least 1 gram of gold to request delivery as a coin or bar.
5. Transparency: Trusted platforms provide real-time market rates and clear pricing. This ensures you get fair value for every transaction.
6. No Storage Hassles: The gold is stored safely by the provider, so you don’t have to worry about storage or security.

Digital Gold Disadvantages

There are no major cons. Just choose a reliable provider and platform to ensure safety and avoid fraud.

What are Gold ETFs? 

A Gold ETF is an exchange-traded fund that tracks the price of gold. This is a passive investment in gold offered by AMCs. These funds invest in gold and closely follow the domestic price of physical gold. Each unit of a Gold ETF represents one gram of 99.5% pure gold.

Gold ETFs trade on the stock exchange like shares, so investors can buy and sell freely. This makes Gold ETFs highly liquid. Of course, since they are traded on the stock exchange, a Demat account is required for transactions, which attract brokerage fees.

An additional investment cost layer is the fund management fee. To liquidate, you can just sell your Gold ETFs on the exchange, and the money is credited to your account. There is no option to convert them into physical gold.  

Gold ETFs Advantages  

1. Easy to Buy and Sell: Gold ETFs can be traded on stock exchanges just like shares. You can buy or sell your gold units anytime during market hours.
2. No Storage Hassles: Since Gold ETFs are stored in electronic form, you don’t need to worry about storage, safety, or insurance like physical gold.
3. Lower Costs Compared to Physical Gold: Buying physical gold comes with making charges and storage costs. Gold ETFs have lower costs as they eliminate these extra expenses.
4. Tax Benefits: If you hold Gold ETFs for over three years, you can benefit from long-term capital gains tax with indexation, which reduces tax liability.
5. Transparency: Gold ETFs follow real-time gold prices, so you receive fair pricing without hidden charges. Investors can check live market rates anytime.

Gold ETFs Disadvantages

No Tangible Asset: Unlike physical gold, Gold ETFs exist only in electronic form. You cannot hold or use them like jewelry, gold coins or bars.

Subject to Market Risks: Gold ETFs are traded on the stock market, so prices may fluctuate due to market conditions, interest rates, and currency changes. This means your gold investment can go up or down these factors.

Management Fees: Fund houses charge a small annual fee for managing Gold ETFs. This cost slightly reduces overall returns over time.

Limited Accessibility: To invest in Gold ETFs, you need a Demat and trading account. This requirement may not be convenient for everyone, especially those unfamiliar with stock market investments.  

What Is The Expense Ratio & Exit Load In Mutual Funds?

The expense ratio is the charge by the fund manager for their services. Exit load is nothing but a small cut on your yields that goes as a commission again to the fund.

1. You should know everything about taxes before investing in Gold ETF because the taxes vary dynamically according to your investment returns & duration of the investment.
2. There is a huge problem of tracking errors which is common in all kinds of ETFs. It’s the delay between the change in the price of gold & the updation of that in the unit you

After all these points, still you can’t ignore the market risks because it’s a traded fund. Secondly, you will have to keep in mind the DEMAT A/c charges like AMC (Annual Maintenance Charges) & Brokerages.

At the end of the day, we as an investor expect some returns that can at least beat the consumer inflation, or else there’s no point in investing.

Looking at all the above points it feels that beating the inflation on paper might be possible with ETFs but when you encash the same, it’s difficult to see the actual returns.

Key Differences Between Digital Gold and Gold ETFs

                                                     Digital Gold Vs Gold ETFs

Who Should Invest in Digital Gold?

• Small Investors – Best for those who want pure gold without making full payments upfront.
• Beginners – Consider investing in digital gold if you are a beginner. No Demat account is needed, easy to buy and sell.
• Short-Term Investors – Quick transactions and high liquidity.
• Young investors: Seeking a flexible and convenient way to purchase gold
• Future Physical Gold Buyers – Can convert it into real gold later. 
• Hassle-Free Investors – No storage or security worries. 

Also Read This – Beginners Guide to Investing in Digital Gold  

Who Should Invest in a Gold ETF?

• Stock Market Investors – Ideal for those already trading stocks.
• Long-Term Investors – Offers tax benefits with indexation.
• Regulated Market Preference – Good for those who trust SEBI-regulated investments.
• Diversified Portfolio Holders – Great for investors who want to invest in gold as part of their asset mix.

Go For the Gold That Works for You

Both digital gold and Gold ETF have their own advantages. It all comes down to what suits you best.

Do you prefer direct gold ownership with easy access?

Or do you like the flexibility of trading on the stock market?

The right choice depends on your goals, risk comfort, and investment style.

If digital gold feels like a better investment option, you can invest in digital gold with DigiGold. Your gold stays safe in government-trusted BRINKS vaults.

With over 40 years of trust in bulk gold and silver, DigiGold offers 24/7 support and the purest 24k gold at the best market prices.

Buy, sell, gift, and store gold anytime, anywhere—all online with us.