written by | January 6, 2023

What are the Smartest Ways to Invest in Digital Gold?

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Table of Content


The value of gold appreciates as the price of gold increases, which then accumulates in the form of capital gain for the investor. India is the world's second-largest consumer of gold. It also has one of the biggest gold markets. Although buying physical gold is the most common and well-liked way to invest, digital gold investment has recently gained popularity. Suppose you are planning to invest in digital gold. 

Did You Know? Sovereign Gold Bonds are one of the most secure investments, backed by a guarantee from the government with a very low chance of default.

What is Digital Gold?

An alternative way to purchase physical gold is to purchase it digitally. Gold can be bought online, and an equivalent amount is kept as actual gold in a vault that is protected either by the government or through other certified authorities.

One can invest as low as ₹ 1 in digital gold. Customers have the option of selling all or a portion of their gold at any moment for the current market price. These golds are all of 24K and have official certification. It guarantees purity and eliminates the possibility of deception.

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

Ways to Invest in Digital Gold

There can be various ways to invest in digital gold. However, the following are the most common ways:- 

Sovereign Gold Bonds

Under the Gold Monetization Scheme, the government introduced the Sovereign Gold Bond Scheme in November 2015. In accordance with the plan, the issues are opened for subscription in tranches by the RBI after consulting with the government of India. The terms and conditions for the scheme are periodically announced by RBI. 

Following are the Salient features of Sovereign Gold Bond -

  • The Reserve Bank of India will issue these bonds on behalf of the Indian government.
  • The Bonds will have a base unit of 1 gram and be valued in multiples of gram(s) of gold.
  • The bond will have an 8-year tenor with three exit options that can be utilized on interest payment dates in the fifth, sixth, and seventh years.
  • One gram of gold will be the smallest investment that is allowed.

The maximum amount that may be subscribed for each fiscal year should be 4 Kg for an individual, 4 Kg for HUF, and 20 Kg for trusts and other similar entities. You will be required to get a self-declaration to that effect. The annual cap will comprise bonds purchased in various tranches during the year.

Exchanged Traded Funds

Exchange Traded Funds for gold are straightforward investment instruments that combine the simplicity of investing in gold with the flexibility of stock investments. Exchanged Traded Funds can be purchased and sold continually at market prices on the National Stock Exchange's cash market, just like any other type of business stock.

Also Read: 10 Top Gold Loan Companies in India One Must Know | Khatabook

What are Gold Exhange Traded Funds?

Gold Exchanged Traded Funds are passive investment vehicles that invest in gold bullion and are based on gold prices. The holdings of an Exchanged Traded Fund are completely transparent due to its direct gold pricing. Furthermore, Exchanged Traded Funds have significantly reduced costs compared to real gold investments because of their distinct structure and formation method. 

Multi Commodity Exchange Gold Contracts

Through India's renowned commodity exchange, the Multi Commodity Exchange, or Multi Commodity Exchange, gold contracts offer a way to trade the metal. In essence, Multi Commodity Exchange gold contracts are like derivative futures and options contracts that give investors the chance to speculate, hedge, and trade in gold for a brief period of time. These are best traded under supervision and are appropriate for more experienced investors. 

What is the Largest Commodity Market in India?

The largest commodity exchange market in India and the sixth largest in the world is the Multi Commodity Exchange (MCX), as it is more frequently referred to. It is based in Mumbai and has a reputation for turning around the fortunes of individuals who transact business with it. The biggest traded commodity on this market is gold, and there are other bullion options available as well.

Best Ways for Buying Digital Gold in India

Companies which enable digital gold trading, provide a web platform or mobile application that supports buying and selling digital gold for investment for as low as ₹1. The underlying physical gold is kept in protected locker facilities and depositories managed by companies.

The following are some direct options for purchasing gold in digital form:

  • When the RBI announces the series of Sovereign Gold Bond bond offers, Sovereign Gold Bonds may be purchased from them which will be stored like a digital asset. You will receive interest on the amount invested and capital appreciation as well.
  • The mutual funds also provide gold in the form of exchanged traded funds. Various mutual fund companies provide gold exchanged traded funds.
  • The Multi Commodity Exchange sells Multi Commodity Exchange gold contracts, which can be acquired straight from the market, and based on speculations, trade can be made to make money out of it.
  • Only after the KYC verifications, Golds can be purchased from the various organizations which sell digital gold.
  • Alternatively, Digital Gold can be Traded in the secondary market, or purchased from exchanges like the Bombay Stock Exchange and the National Stock Exchange, which provide a venue for buyers and sellers to conduct business and function as mediators.

Also Read: Sovereign Gold Bond Scheme - Why to invest in Sovereign Gold Bond Scheme, Advantages, Eligibility & Features

Benefits of Digital Gold Investments

There are numerous benefits of storing digital gold. The most obvious are convenience to the buyer, ready market price, etc. The flowing are a few of the benefits of Digital Gold Investments explained in detail-

Convenience

Digital gold may be purchased and sold anytime, anywhere, and in a matter of seconds. This convenience is not offered when purchasing physical gold, which must be done via trustworthy merchants that sell government-hallmarked jewelry. This provides the buyer the liquidity to sell the gold at any time and withdraw the investment. This convenience cannot be available in the case of physical gold which you will be required to be hold in a physical market. 

Highly Secured

Since various digital gold options are traded on stock markets, sovereign gold bonds and gold exchange-traded funds are extremely transparent investments. The government provides a sovereign guarantee for sovereign gold bonds, making investments in them risk-free or with little chance of default.

Decent Returns

As only interest may be earned on the investment made in other bonds, such as corporate or government bonds, gold bonds have greater advantages. Gold bonds allow investors to benefit from both interest and rising gold prices. When gold is purchased digitally, the investor receives interest and an increase in the gold's worth.

Pure

Since digital gold is exclusively exchanged in 24-carat form, which is the greatest purity for the metal, its purity is guaranteed when we purchase it. This is not the case when investing in physical gold because there is a chance for abnormalities due to dishonest activities like gold plating ornaments that make the gold appear to be pure when it is not.

Conclusion

Gold may not be an ideal investment for everyone and it may not be the best choice for investors looking for growth or income. But there are also other factors to consider when investing in gold, such as storage and insurance costs, which can eat into returns. It is always a good idea to diversify your portfolio and consider a range of investment options, including stocks, bonds, and real estate, in addition to any gold holdings.. Reinventing new avenues of gold investments like digital gold overcomes various limitations of physical gold investments. Digital Gold excites the new generation to invest in gold rather than taking more risk investing in shares in the portfolio. 

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FAQs

Q: What are the various features of Sovereign Gold Bonds?

Ans:

Following are the Salient features of Sovereign Gold Bond -

  • The Reserve Bank of India will issue these bonds on behalf of the Indian government.
  • The Bonds will have a base unit of 1 gram and be valued in multiples of gram(s) of gold.
  • The bond will have an 8-year tenor with three exit options that can be utilized on interest payment dates in the fifth, sixth, and seventh years.
  • One gram of gold will be the smallest investment that is allowed.
  • The maximum amount that may be subscribed for each fiscal year should be 4 kg for an individual, 4 kg for HUF, and 20 kg for trusts and other similar entities. You will be required to get a self-declaration to that effect. The annual cap will comprise bonds purchased in various tranches during the year.

Q: What does it mean to buy gold digitally?

Ans:

With the convenience of digital access to Gold, you can invest in small fractions of gold at any time, anywhere. The value of gold appreciates as the price of gold increases which then accumulates in form of capital gain for the investor.

Q: What are the various benefits of Digital Gold?

Ans:

Following are a few benefits of Digital Gold -

  • Convenience 
  • Purity of 24K
  • Highly Secured
  • Decent Returns

Q: What are the various ways to invest in Digital Gold?

Ans:

There can be multiple ways to invest in digital gold. The following are the most common ways - 

  1. Sovereign Gold Bonds
  2. Gold - Exchanged Traded Funds
  3. Multi Commodity Exchange Gold
  4. Digital Gold organizations

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.
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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.