Digital gold or physical gold: 3 things to consider

Purchasing and investing in gold has always been a part of most Indian families’ investment plans. We have an emotional and cultural bond with gold and have immense love while purchasing it. In fact, gold and land are the two most chosen investment options in our country still now.

In the ancient period, Indians believed gold was the best investment strategy to help people avoid financial mishaps. Indian families’ faith in gold is inherently passed on to the next generations, and even today’s millennials also prefer gold as their investment choice. Indian millennials believe purchasing and investing in gold comes with lesser risks, has a good shelf-life, is easily cashifiable, and with constantly increasing value.

Though gold consumption is still the same as before, the ways and methods of buying and investing in gold have taken various forms. From majorly buying gold as jewellery, accessories or ornaments, people have actively shifted to gold bonds, coins, and digital gold.

Although India’s contribution and hold of virtual gold is less than 1% of the world, a Fortune India article says there has been an eightfold increase in digital gold folios in the last two years in India. Indian government and RBI also significantly influence people’s shift towards digital gold. They have simplified the purchase of digital gold and gold bonds and made the KYC norms easy.

Though digital gold interest towards digital gold is increasing, we always have the question of which one is better to invest in - Physical or Digital gold. This article will take you through the major considerations you need to have while purchasing and investing in gold.

Physical gold investment

Investing in physical gold is the most preferred gold purchase option among Indians. Through the steadily increasing demand for the yellow metal, we can see the improving purchasing power of Indians. Physical gold is mainly purchased in the form of jewellery, accessories, gold coins and biscuits.

Investing in physical gold comes with its own drawbacks. The minimum invest in physical gold is usually high. You might need a considerable amount to purchase every piece of jewellery. It will be combined with the additional making and wastage charges. The cost spent in storing and securing gold also demands high charges. And above all, having physical gold in our hands gives us the constant fear of theft.

Though investing in physical gold has its cons, its benefits overshadow them, and it persuades people to buy physical gold.

Benefits of physical gold

• The appreciation value of gold is constantly increasing.

• Gold has been the Indians’ most desired and prized precious metal and has a solid socio-cultural bond with us.

• It has a high intrinsic value, allowing people to easily pledge or sell the asset and liquidate it whenever needed.

• The depreciation value of gold is low. People also choose to remodel or exchange their gold jewels easily.

• The investment in gold as an asset can be easily passed on to future generations.

Digital gold investment

Digital gold is the best alternative to physical gold investment. Digital gold can be bought as gold bonds and digital gold units from government-authorised companies - Augmont Gold Ltd, MMTC-PAMP India Pvt. Ltd., and Digital Gold India Pvt/ Ltd with its SafeGold brand.

While compared with physical gold investment, digital gold is considered a cost-effective and efficient investment method. Every unit of digital gold you purchase comes with 24K purity and is regulated under government norms.

In India, you can purchase gold from various apps and websites like Spare8. Unlike buying gold ornaments or jewels, you don’t require a lump sum amount to invest or buy digital gold. You can start investing in digital gold for a minimum of one rupee. The storage, security and maintenance cost of digital gold is the bare minimum. The invested digital gold will be stored in the safe vault of the trading company under the investor’s name.

However, digital gold also has its own drawbacks. The websites and apps (trading partners) charge a management fee and sometimes require storage costs, insurance and redemption fees. Also, there is no proper regulatory authority for digital gold trading companies.

Digital Gold vs Physical Gold. Which is better?

Here are the three primary considerations you need to know before choosing between physical and digital gold.

Price and minimum investment

The price of physical gold is not uniform at its consumption stage. The price varies from one piece of jewel to another. The making charges and wastage also vary. But the price of digital gold across the country is similar.

While you need a lump sum amount to buy physical gold, you can start investing in digital gold from one rupee.

Quality

While every rupee you put into digital gold promises and guarantees you 24K pure gold, the purity of physical gold cannot be guaranteed. Few other materials are added with gold to make them into ornaments, which changes the purity of the gold. Buyers and investors need to check the purity of the physical gold every time they buy.

Liquidity

Physical gold can be pledged or sold to convert them to cash again. With digital gold, people can redeem it as physical gold coins or sell them again to the trading partner and get the cash. In both cases, there won’t be any lengthy process of charges to liquidate the gold investment.

Conclusion

Both digital and physical gold has their own benefits and drawbacks. As a buyer or an investor, you should understand the pros and cons and make a conscious choice of investment that will benefit you the most.

If you are looking for a simple and secure way to start investing, check out Spare8.

Spare8 is the best app for investment that facilitates buying digital gold automatically along with your everyday online transactions. Whenever you spend money digitally via your cards, net banking or UPI, Spare8 will round off the amount to the nearest 10 Rupees, and the rounded-up change will be invested into 24k digital gold.