written by | June 8, 2022

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Table of content

Everything You Need to Know About Digital Gold

Digital gold is a groundbreaking new way of investing in this yellow metal, which has long been a popular investment option. The way individuals buy, sell, and use gold is changing because of digital gold. Trading in digital gold makes a gold trading lot transparent and frictionless and considerably more affordable. Digital gold can be acquired for under ₹1 on some platforms, allowing you to avoid saving enough for days or weeks to buy gold.

However, you can spend slowly but surely over time to build a sizable corpus and attain your long-term goals. Digital gold also eliminates security worries, as purchasing it on some exchanges includes free access to a secure vault that may be used for up to five years.

Folks have been trading in gold for a long time, and it is regarded as a safer trade than, say, debt or stock. There are now, except in the past, different forms of investments in gold, and this article will focus on one of the most popular: digital gold. But first, a disclosure: digital gold does not fall under the jurisdiction of any finance industry regulator; it is a legal grey area.

Did you know?

In 1996, e-gold was launched as a computerised gold currency.

 

What is Digital Gold?

Digital gold is a virtual way to purchase and invest in the gold without possessing it in your hands. It's available for purchase on the internet. The minimum purchase or sale price is one rupee.Digital gold can be very easily bought online & it’s stored in protected vaults by your seller on your behalf.

How does Digital Gold work?

Digital Gold eliminates three significant problems connected with traditional gold purchases and sales. Among them are:

  • Expense: Buying gold traditionally entails approaching a reputable jeweller after years of saving and then paying the jeweller significant manufacturing charges and the related price of purchasing gold. In some markets, digital gold may be purchased for ₹1. As a consequence, gold is a viable investment opportunity for everybody.
  • No Security Fees: Storing gold purchased in the past was expensive because people chose to keep it in lockers, which cost a lot of money. People previously had no alternative because holding gold at home poses risks like theft, robbery, and other crimes. When you purchase digital gold on some markets, you will also receive free access to a secure vault for five years.
  • Liquidity: Although this precious metal has traditionally been the favoured form of investment due to the simple liquidity choices it provides, there were certain limitations. For example, if you buy gold through one company, you could only resell it to them for considerably lower than you originally paid. 
  • If a jeweller other than the one you purchased your gold repurchases it, the price will be much lower. As a consequence, gold is not ever profitable to sell. However, you can sell digital gold at market values on some platforms, ensuring that your losses are minimised. Furthermore, you won't have to look for a buyer, resulting in a significantly faster transaction.

Also Read: What Is Gold Loan & How to Apply for Gold Loan - Benefits, Gold Loan Rates & Eligibility

What Is the Efficient Way to Exchange Digital Gold?

To begin, go to any digital gold platform where you can invest in digital gold, such as Khatabook.

Once you're on their interface, follow these instructions:

1. Enter an amount in or grams - You can purchase gold for a particular amount or by mass at the present market price.

2. Choose a payment procedure — After getting the KYC verified, you will be given several payment options, including a card or an account.

3. Store the gold in a safe place – Your profile is quickly up to date and available at any time.

4. Trade whenever you choose - You can trade your gold to the platform online at any moment.

5. Get physical delivery of your gold — If you don't want to sell your gold, you may have it delivered to your home in coins or points. There are delivery fees to consider.

The Advantages of Digital Gold 

You gain the following perks if you buy digital gold on specific markets:

  • There are no depository costs because the digital gold is acquired with a vault with no further fees.
  • Customer Portal provides real-time access to actual prices, allowing for educated decisions on the optimum moment to purchase or sell gold.
  • The rapid procedure allows for faster transactions when buying and selling gold.
  • Reduced investment costs, as low as ₹1, make building up a large corpus over time more accessible.
  • On select markets where you can buy Benchmark certified 24k pure gold, purchase safety is assured, which is usually only accessible with reputable jewellers.

Digital Gold's Risks

  • No governing body

The absence of good agencies overseeing trading laws and regulations is one of the most significant downsides of virtual gold. Consequently, there are many grey areas in the environment that unethical elements could abuse.

  • The time limit for storage

Physical gold is kept in vaults that are both protected and insured. On the other hand, many platforms offer such storage for a set amount of time. After the specified period has expired, the gold must be withdrawn or sold.

  • Maximum investment amount

There is a ceiling on virtual gold investment. An investor can currently invest up to ₹2 lakh on most platforms. Consequently, this is not an appealing alternative for those wishing to make significant investments. 

Why did the Value of Gold Increase During Pandemic?

On January 1, 2020, the price was ₹39,100.

As of October 28, 2020, the price was ₹52,300.

Percentage of returns: 33%

To explain the primary point, look at the coronavirus situation. The nationwide lockdown resulted from layoffs and increasing debt pressure on individuals and businesses. The government and the RBI have to increase purchasing while maintaining the economy afloat by limiting growing debt rates.

This boosted the supply of money, pouring more money into Indians' pockets. This surplus reduces the currency's purchasing value, rising inflation fears.

However, gold protects buying power against currency depreciation. Consequently, the value of gold rises and gold prices rise in tandem. 

Digital gold would be an exciting investment for people who wish to invest in physical gold once the investment ceiling of ₹2 lakhs is established and a regulating body is established.

Also Read: What is Gold Monetisation Scheme? Know Benefits, Eligibility & Features

Digital and Physical Gold are Both Subject to Taxation‍

Gains from the selling of physical gold are taxed differently depending on whether they are short/long term.

Any profits from the sale of your gold holdings (which could include gold rings, digital gold, or nuggets) over 3 years of the date of acquisition will be regarded as Short-Term Capital Gains (STCG).

Without KYC, digital gold can be bought, but only up to a specific quantity, depending on the system. Some prominent apps allow you to buy gold valued at up to ₹50,000 without requiring a KYC.

Conclusion

Gold should undoubtedly account for a tiny portion of our portfolios as an investment class. However, there are better investment options in gold than digital gold, such as Gold ETFs. The main argument is that gold should be included in a long-term investment portfolio. In this regard, gold bonds are preferable because they pay an extra 2.5% in interest. However, Gold ETFs are better for short-term hedging because SEBI regulates them. After all, assets are less liquid. Digital Gold would be an exciting investment for people who wish to invest in physical gold once the investment ceiling of ₹2 lakhs is established and a regulating body is established. Digital assets are rapidly replacing traditional physical assets. Despite various disadvantages such as investment limitations and the lack of a governing organisation, digital gold is a good investment choice. It provides versatility, purity, and excellent value for money. Follow Khatabook for the latest updates, news blogs, and articles related to the gold industry.

FAQs

Q: What happens to the Digital Gold I purchase?

Ans:

Physical gold assets housed in a vault back up the digital gold you buy on some exchanges. When you purchase Digital Gold, you gain access to the user's private locker that you could use for five years at no additional cost.

Q: Who should consider buying Digital Gold?

Ans:

Anybody who can afford to purchase physical gold or invest large quantities of money in it at one time might opt for digital gold. Companies sell digital gold that is 99.9% pure 24-carat gold and can be purchased for as little as ₹1, which means you shouldn't have to stress keeping it secure.

Different brokers who facilitate the purchase of digital gold could also be used to purchase digital gold.

Q: Where can I purchase Digital Gold?

Ans:

Several authorised apps and gateways can be used to purchase digital gold.

Some apps sell digital gold for as little as one rupee. Some apps, backed by NPCI and the leading UPI providers in the marketplace, continuously invest your money in this popular asset, encouraging you to save every day.

Q: Will your digital gold be lost if you misplace your smartphone?

Ans:

No. Digital gold, like shares on the stock exchange, is listed in your name.

It is kept safe in vaults that have been insured and certified by an external trustee.

This assures that your gold is safe, even though the application you used to buy it goes away.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.