• 25 Oct , 2024
• Blog

Is Digital Gold Investment Better Than Other Gold Assets?

Is digital gold the future of investing? Is it really better than other gold assets?

It seems so, especially with the growing interest among Indians. 

In fact, there are around 40,000+ active digital gold users on our platform.

The digital gold investment demographics are also interesting.

Out of our total active users, 33,000+ are men, while 6,000+ are women.

Among these investors, 2,500+ users are between the ages of 18 and 24, and 7,000+ users are between the ages of 24 and 35.

This indicates a growing interest in digital gold investment among younger adults.

One reason for this popularity is the high satisfaction from buying pure digital gold.

A survey revealed that 36% of respondents prefer Digital Gold because they can buy 24-carat gold in smaller amounts.  All of these numbers reflect a shift toward modern investment strategies. 

This rising interest makes it essential to ask: Is digital gold investment better than other gold assets? 

Let’s explore this important question together. 

We have prepared a detailed comparison of digital gold investment with physical gold, Gold ETFs, Gold Mutual Funds, Gold Stocks, and Sovereign Gold Bonds to help you make smart investment choices.

Before we Start Comparing, Let’s First Understand Digital Gold 

How Digital Gold Works?

Digital gold is a new modern concept in the investment world.

When you invest in digital gold, you purchase gold in small quantities, often as low as a gram.

The gold is stored in secure vaults managed by trusted institutions. You own the gold in digital form, but it is backed by real physical gold.

Purchasing digital gold is simple. Investors can buy it through various digital platforms.

Once bought, the gold is tracked and recorded digitally.

When you decide to sell your digital gold, the process is quick and efficient.

You can sell it back to the platform or transfer it to a physical form.

Benefits of Digital Gold Investment

• Convenience: You can buy and sell digital gold anytime, anywhere. This flexibility makes it easier for investors to manage investment portfolios.
• No Storage Issues: Digital gold eliminates the need for physical storage. You don’t have to worry about theft or loss of gold.
• Low Minimum Investment: Many platforms allow you to invest in digital gold for as small as 1 Rs. This accessibility attracts new investors who may be hesitant to invest larger amounts.
• Liquidity: You can convert your digital assets into physical ones easily. This is important for investors who may need quick access to their funds. You can sell your digital gold, and the amount will be transferred to your bank account.
• Transparency: Reputable platforms provide regular updates on the value of your gold. This ensures you know how your digital gold investment is performing.

Comparing Digital Gold with All Types of Gold Assets 

Digital Gold vs Physical Gold 

Ownership and Storage

Physical gold refers to tangible gold assets, like gold coins or bars. When you invest in physical gold, you own it directly. You can hold it in your hand and store it as you like. However, this means you need a safe place to keep it. You also have to consider insurance to protect it from theft or damage.

In contrast, digital gold is a convenient option because all investment activities are conducted online via an app. Your digital gold is stored electronically, so you don't have to worry about physical storage or safety.

Around 39% of people believe digital gold is less risky than storing physical gold at home because it eliminates concerns about theft. The provider manages this for you, which simplifies the investment process.

Liquidity

Selling physical gold can take time. You need to find a buyer and possibly negotiate a price. It may not always be easy to convert it to cash quickly.

However, Digital gold investment offers greater liquidity. You can sell it online anytime, and the transaction is usually processed instantly into your bank account.

Cost and Fees

Buying physical gold involves additional costs. There may be making charges, shipping fees, and storage expenses. In digital gold, there is no need to pay making charges.

You only pay a small premium over the market price. However, if you ever want to convert it into physical form, you'll need to pay making charges. To avoid this, you can sell it digitally and skip this cost.

Accessibility

Digital gold can be bought through apps or websites, making it easy for everyone to access. You can purchase gold online in small fractions. 
Physical gold investment usually requires a bigger initial investment and may not be as practical for all investors.

Digital Gold vs. Gold ETFs

Understanding Each Asset

Gold ETFs (Exchange-Traded Funds) are funds that track the price of gold. When you buy a share of a gold ETF, you invest in gold without owning it physically.

Digital gold, as mentioned, is an online gold investment stored in a vault.

Ownership

With digital gold, you own the actual gold. You can redeem it for physical gold if you wish.

In contrast, with a gold ETF, you own shares in the fund. You do not have direct ownership of the gold. This difference can be significant for some investors.

Ease of Investment

Investing in digital gold is straightforward. You can purchase it through an app in a few clicks.

Gold ETFs are also easy to buy, but they require a brokerage account. This adds a step and extra cost to the investment process.

Fees and Expenses

Gold ETFs usually have management fees. These can reduce your overall returns over time. Digital gold generally has no hidden fees.
You pay only for the gold you buy. This makes digital gold more transparent in terms of costs.

Performance and Returns

The performance of gold ETFs directly tracks gold prices. However, they can be affected by fund management decisions.

Digital gold's value is tied directly to the market price of gold. This means your investment reflects real-time gold prices without external influences.

Sovereign Gold Bonds (SGBs) vs. Digital Gold

Definition and Structure

Sovereign Gold Bonds are government securities denominated in grams of gold. They offer investors an opportunity to earn returns based on the price of gold.  Digital gold, on the other hand, is the online purchase of gold that is backed by physical gold stored in a vault. 

Interest Returns

SGBs offer a fixed annual interest of 2.5% on top of the price appreciation of gold. Digital gold does not provide any interest. You only earn returns from price movements.

Liquidity

SGBs have a lock-in period of 8 years. Trading SGBs on the secondary market is possible but may involve liquidity challenges. Digital gold has no lock-in period, and you can buy or sell instantly.

Flexibility

Digital gold allows you to invest in small quantities and exit anytime. SGBs have a minimum investment requirement and are more suited for long-term investors due to the lock-in.

Safety

Both SGBs and digital gold are safe. Sovereign Gold Bonds (SGBs) are backed by the government, while digital gold is supported by private companies with insured storage.

Tax Treatment  

Digital gold is taxed on capital gains depending on how long you hold it, and it doesn't have any special tax benefits. In contrast, the interest earned from Sovereign Gold Bonds (SGBs) is tax-free. If you hold the bonds until maturity, you won’t pay any capital gains tax.

Gold Mutual Funds vs. Digital Gold

Ownership and Control

Gold mutual funds allow you to own shares in a fund that invests in gold-related assets. This means you don’t own the gold directly. With digital gold, you own the actual gold. You have more control over your investment. You can choose to sell it anytime or transfer it to someone else.

Investment Amount

When investing in digital gold, you can buy as little as one gram. This is great for new investors or those with limited funds. Gold mutual funds usually require a higher minimum investment. This amount can be higher and may not suit everyone. Digital gold offers flexibility and lower barriers to entry.

Fees

Gold mutual funds usually have management fees that can lower your overall returns. On the other hand, digital gold platforms do not charge any management fees.

Performance Tracking

Gold mutual funds aim to outperform the market by investing in various gold assets. However, this means they might not always track the gold price closely. Digital gold investments usually mirror gold prices more accurately, making them more straightforward for investors who want direct exposure to gold.

Flexibility

With mutual funds, you might have to wait for specific periods to redeem your units. Digital gold offers more flexibility. You can buy or sell at any time, giving you greater control over your investment.

Gold Stocks vs. Digital Gold

Exposure to the Market

Investing in gold stocks means you are investing in mining companies. Their performance depends on the company’s success, not just on gold prices. On the other hand, digital gold provides direct exposure to gold prices. If you believe in gold’s value, digital gold is a safe and better option.

Risk Factors

Gold stocks can be riskier. They are affected by mining costs, management decisions, and market conditions. Digital gold is less volatile. Its value is based on the gold market, making it a safer choice for many investors.

Dividends

Some gold stocks pay dividends. This can provide regular income in addition to capital gains. Digital gold does not offer dividends. Your returns will depend on gold price appreciation alone.

Market Volatility

Gold stocks can be more volatile than gold itself. Economic factors and stock market trends can cause significant price swings. Digital gold tends to be less affected by these market fluctuations, making it a more stable investment.

Which Gold Investment Option Will You Pick?

Now that we've explored different gold investment options, it's time for you to decide.

Each choice has its pros and cons. Think about what matters most to you. Is it security, convenience, or potential returns?

If you're looking for a low-risk, safe, and convenient option, consider investing in digital gold with DigiGold.

Digigold offers a simple and safe way to invest in gold. You can start with just Rs 1!

Plus, we have a No Locking Period SIP in Gold that begins with only Rs 500 through easy periodic installments.

You don’t need a lot of money to buy digital gold. Just a small investment can go a long way. We also assure you of quality by providing 24 Karat Pure Gold with 99.9% purity and certifications.

It’s easy to manage your investment. You can buy and sell gold online, everything from your phone or computer.

Small steps lead to golden gains—try digital gold as an investment option with digital gold!