Digital gold — Important terms and aspects related to it
Digital gold is a new-age version of buying gold through online channels. It is a more convenient and cost-effective alternative for those who want to buy gold. With its growing popularity and ease in the investment process, it is favoured by many people today, and many wish to learn about it in depth and obtain thorough information before beginning to invest.
In this article, we deep dive into aspects and important terms related to this new-age form of the precious yellow metal — digital gold.
Digital Gold — Important terms and aspects related to it
For those who are unfamiliar with this new-age notion of "digital gold" and wish to have a better understanding, the terms mentioned below will provide a better understanding:
1. Digital Gold
As the name implies, "digital gold" is a product provided online that allows consumers to virtually store gold without the need for a safe or bank locker. For each online purchase, the vendor stores an equivalent weight of real gold in a secure vault.
For every gram of gold purchased, genuine 24-karat gold is stored in a locker in your name by one of India's three gold banks: Augmont | MMTC | PAMP | SafeGold. With the push of a button on the app, investors can simply buy, sell, or request physical gold be delivered to their homes. Furthermore, there is no minimum purchase amount for digital gold. You can begin with as low as Rs 1.
2. Bullion
Bullion is a broad term for gold and silver with a purity of at least 99.5% that has been converted into bars or struck into coins for investment purposes.
3. Allocated Gold
It is actual gold housed in a vault by an independent provider that is owned outright by the owner and is unaffected by the vault provider's financial performance.
4. Inflation
Inflation is a measure of the growth in commodity prices, which indicates a currency's loss of purchasing power.
5. Platform
Platform means the actual place through or where a transaction takes place: (i) the Website; and (ii) an App (like Spare8).
6. Investment time limit
Digital gold investments can only be held for a limited period before the investor must either take delivery of the gold or sell it. If the delivery is not completed by the deadline, investors must pay additional fees. To keep their digital gold account active, investors can transact a modest amount every few months. As the deadline approaches, one should select how they wish to redeem their digital gold.
7. GST Payment
Similar to buying physical gold, an investor must pay a 3 percent Goods and Services Tax (GST) when buying digital gold to cover costs including storage, insurance, and trustee fees. If someone spends Rs 10,000 on digital gold, for instance, they will only receive Rs 9,700 worth of gold because the remaining INR will be deducted as GST.
8. Know the spread
The "spread" refers to the price difference between the purchase and sale. This spread usually ranges from 2 to 3 percent for digital gold as it covers 1 to 2 percent of bank/credit card transaction charges. Moreover, when customers sell back their gold, the 3 percent GST charged on it is lost because only VAT-registered businesses are eligible to claim the GST.
9. Safe Keeping/Vaulting of Gold
Gold purchased by the client in response to the customer's request will be stored in a vault on your behalf with a custodian ("Vault Keeper"). Spare8 is currently the vault keeper.
Customer hereby authorises (i) the appointment of such a vault keeper to safely keep the gold purchased and (ii) Augmont to store such gold products purchased by the client, including, but not limited to, bullion, coins, or jewellery (as the case may be), in the secured vault on customer's behalf ("Customer Gold").
10. Micro Investment
The older generation must save money for months to purchase gold physically, while the price of gold rises over time. However, with digital gold, if you have Rs. 100 today, you can immediately buy gold for that amount. It enables users to purchase digital gold at initial intervals, which will build into a significant investment over time.
11. Digital Security on Digital Gold
Converting real gold into liquid cash takes time as well. When a person resells the jewellery, he or she will not receive the same amount of gold that was purchased. There may be wastage due to wear and tear, loss of money spent on making charges, and wastage when purchasing the jewels. However, with digital gold, none of these issues may arise. If you invested 1000 rupees in digital gold a year ago for 1gm of gold, it will never lose its worth due to wear and tear because the weight is insignificant. Aside from that, with digital gold, there is no need to worry about theft or additional expenditure on lockers with maintenance costs. Apps like Spare8 store digital gold in digital vaults under the customer's name with no further fees.
Takeaway
Digital gold is a new-age investment tool that allows customers to acquire and hold 24K gold virtually in their digital vaults. A considerably simpler investment alternative than others.
We hope that the terms and concepts explained above help you gain a better grasp of digital gold. Visit Spare8, where users may invest their spare change in digital gold, which is stored in digital vaults guarded by regulated independent trustees, and where they can be certain that their investments in digital gold with us are 100% pure and secure.