All You Need To Know About Digital Gold

Know About Digital Gold

During the pandemic, the gold market is touching heights—the price of gold increases daily. With the increasing costs of gold, this is an excellent time to consider investing in various forms of gold. According to data, the gold prices last year went from 39,100 in January to a high of 52,300 in October. With a 33 percent return, a gold market is a sure place for investors to spend their money.

What is Digital Gold?

Purchasing physical gold has some drawbacks. There are concerns with determining its legality and purity, as well as issues with storage and safekeeping. Another problem is that we are amid a pandemic. It isn’t a good idea to go to a gold merchant or a jewellery store.

Digital gold, on the other hand, will be acquired online and stored by the vendor on behalf of the customer in insured vaults. It also aids us in overcoming all of the issues mentioned above with physical gold purchases. All you need is Internet/cell banking to put money into gold digitally at any time and from anywhere.

Now that we know what is digital gold let us look at the online platforms where to buy digital gold.

Where to Buy Digital Gold?

Any e-wallet platform, such as Google Pay, Paytm, and PhonePe, can be used to invest in digital gold. Digital gold can also be purchased from HDFC Securities, Bajajfinserv, and Motilal Oswal. These websites and businesses exist solely to serve as a platform for the trading firms MMTC-PAMP, SafeGold, and Augmont. 

These apps and websites serve as a conduit between trading platforms and investors. When an investor buys gold on these platforms, the trading corporation deposits an equal amount of physical gold in the vault in the investor’s name. As a result, all investors need to buy buy-in gold on these platforms, and the trading organizations will handle the rest.

During the current time amidst the pandemic, there are only a few companies that are providing gold digitally in India. They are as follows:

  • Digital gold India Pvt/Ltd with its SafeGold brand. 
  • Augmont Gold Ltd.
  • A joint venture between a Swiss firm MKS PAMP and a state-run MMTC Ltd, the MMTC-PAMP India Pvt. Ltd.

As we now know where to buy digital gold, let us get informed on the merits and demerits of investing in digital gold.

What are the Benefits of Investing in Digital Gold?

Digital gold is the modern way of buying and investing in gold. There are some benefits of trading in digital gold. They are as follows:

  • Make little investments: Investors can invest tiny amounts in digital gold. There are no restrictions or purchasing minimums.
  • Quality: Investors will only possess 24K pure gold, and the quality will not be compromised. As a result, they do not have to be concerned about safety or purity.
  • Redemption: Digital gold deposits can be quickly redeemed. Redeeming gold in the form of actual gold bars or coins is possible. You can even cash out your digital gold assets.
  • A loan secured by digital gold: Digital gold investors can use their holdings as collateral for loans.
  • Safety: The digital gold assets are insured and carefully held in a secure vault. As a result, there is no need to be concerned about theft or loss. The seller bears responsibility for digital gold.
  • Keep track of your investments: Online platforms make it simple to keep track of one’s finances (apps or websites). One can quickly analyze the performance of their investment and acquire more significant insights.
  • Diversification of your portfolio: Digital gold is a fantastic hedging asset and an excellent method to diversify an investment portfolio.
  • Rates in real-time: Gold is available for purchase on internet sites at real-time gold rates. As a result, the investor can profit from price fluctuations.

What is Digital Gold’s Drawback?

There are advantages and disadvantages to everything you do. Similarly, investing in gold digitally also has some drawbacks. They are as follows:

  • There is no passive income: Digital gold does not generate a steady stream of income. In other words, only after selling gold will one receive a profit. Investors do not accept any interest.
  • Investment ceiling: On most sites, the maximum investment amount is limited to INR 2 lakhs.
  • Charges: Platforms that sell gold online impose a management fee of 2% to 3%, as well as storage and insurance charges. If you wish to convert digital gold to physical gold, you’ll have to pay a fee based on the amount you want to convert.
  • Holding Period: A maximum holding period is set by the trading businesses, after which the investor must sell the gold or convert it into physical gold. Various trading merchants set multiple restrictions. The maximum holding duration for MMTC-PAMP, for example, is five years.
  • There is no regulatory authority: The primary disadvantage of buying gold on the internet is that there is no regulatory framework. These trading companies are not subject to the regulations of SEBI and RBI, which protect the interests of customers.

How Long do you Think You’ll be Able to Keep the Digital Gold?

Gold from MMTC-PAMP: There are no storage fees when you buy gold from MMTC-PAMP, and you can keep the gold for up to 5 years. You must conduct a transaction once every six months to avoid your account being deactivated. You must sell the gold or turn it into gold coins when the 5-year period has passed.

SafeGold offers the following gold: You must pay several fees if you buy gold from SafeGold. You have a maximum of 7 years to keep the gold.

For the first two years, there are no fees. If the amount of gold is less than 2 grams after two years, a monthly cost of 0.05 percent is paid. After each month, the fees are withdrawn from your gold balance.

What is the Investment Return on Digital Gold?

Digital gold investment is treated similarly to absolute gold ownership for all tax reasons. The amount of tax you must pay is determined by the holding period. The returns on digital gold might be considered as short-term capital gain (STCG) if you own it for less than 36 months. The returns on STCG are applied to your taxable income each year. Income taxes are levied according to the statutory tax slabs. If you decide to sell your investment after 36 months, the profits are considered long-term capital gains or LTCG. In these cases, you’d have to pay a 20 per cent tax on your gains, plus a 4 percent cess.

Furthermore, if applicable, a surcharge is imposed. It’s important to remember that the LTCG tax is calculated with the benefit of indexation.

How can One Trade in Digital Gold?

For the trading of digital gold, you can visit many websites like Groww, HDFC Securities, Motilal Oswal, etc. The following steps are required for trading in digital gold.

  • You need to enter an amount in INR to buy gold. You can buy gold for a fixed amount according to your budget.
  • You can also enter the quantity of gold you want to buy in grams. You can buy gold according to the weight of the metal at the live rate of gold in the market.
  • You need to complete the Know your customer (KYC) form first.
  • After completing the formalities required for the KYC form, you will have to make payment.
  • Multiple payment options such as adding an account, card, net banking, or e-wallets are available.
  • Your gold is stored in a secured locker.
  • The account is updated instantly and can be accessed by you 24/7.
  • You can sell your gold whenever you want to according to your needs or requirements. The gold can be sold to the platform itself whenever you want to.
  • If you do not wish to sell the gold digitally, you can request a doorstep delivery of your gold.
  • Collect the gold physically at your doorstep in the form of gold coins or billions.
  • The delivery fees are applicable accordingly.

What is Gold to Indians?

Indians are known for various things around the world, including food, vibrant lifestyle, hospitality, dancing, Bollywood, and so on. Many people are unaware that Indians have a fondness for the gleaming things in life, particularly gold. Indians are the world’s top gold consumers, with approximately 2,000 tonnes of new gold in the country, making it a veritable gold treasure trove. This gold love tale has lasted for millennia, surviving the test of time and growing stronger with each passing day.

Gold is considered auspicious by Indians, and it has become an essential component of their culture. A celebration in India without gold is dreary and lifeless, while gold adds spark and radiance to our festivals. Buying gold is a long-standing custom in India, one that endures regardless of gold price today. Today gold prices in India don’t affect the willingness of Indians to buy gold.

Why Has Gold Been Valuable Throughout History?

Some claim that gold has no intrinsic worth, that it is a barbarous relic with no monetary value. They argue that paper currency is the preferred form of payment in today’s economy and that gold’s only value is as a material for jewellery. Those who say that gold is an asset with various intrinsic attributes that make it distinctive and vital for investors to retain in their portfolios are on the other end of the spectrum. They feel that there are many reasons to invest in gold as there are vehicles through which to do so.

Gold can evoke a subjectively personal experience, but it can also become objectified if it is used as a medium of exchange. Gold may be both quantifiable and tangible while also encapsulating the qualitative and ethereal. Perhaps, gold’s physical property of absorbing light causes its unique gleam to emanate from within.

Investing in Gold in the Past has been done in a Variety of Ways

Gold is one of the most widely traded commodities. It has been a part of human culture’s evolution from ancient to present times. Gold has always been seen as a valuable asset, regardless of age or society. Gold served as both a form of currency and a store of value, laying the groundwork for the modern global economy. Historically, buying actual gold has been the most common method of investing in gold. Physical gold is available in the following forms:

  • Jewellery
  • Gold coins
  • Bullion

Who Should Put their Money into Digital Gold?

An investor who wants to invest in gold but can’t afford the hefty investment or storage charges could investigate digital gold. In other words, investors can invest modest quantities of money in digital gold. There are no restrictions or purchasing minimums. Furthermore, investors do not need to worry about the gold being stored because it is safe in the seller’s vaults.

Buying and selling digital gold is entirely online, and no physical possession of the item is required. The platforms provide digital gold at real-time rates, so there are no price differences to worry about. As a result, individuals who like to make minor gold deposits from the comfort of their own homes can do so with digital gold. Additionally, investors can choose to cash out their investment or redeem it for genuine gold coins or bars.

Read More: The Different Ways to Buy Physical Gold

Is it wise to invest in digital gold?

Because the markets are currently unpredictable and turbulent, digital gold is a safe investment and an excellent strategy to hedge against market volatility. The gold you purchase online is assigned to you as physical gold that you own directly. In the last ten years, gold prices have increased by about 300 per cent.

What are the advantages of digital gold?

The advantage of digital gold is that it is highly liquid and may be converted at any time. Exit loads aren’t charged on gold ETFs, for example, and they have more liquidity.

What is the purity of the gold bought digitally?

The purity of gold while buying digitally is not an issue. The digital gold is 24 Karat. Although it may vary from company to company, it is assumed to be 100 percent pure.

What is the maximum amount for which digital gold can be bought?

The maximum amount is currently limited to only 2 lakh rupees which can be seen as a drawback. Once a regulatory body is involved like the SEBI, the limit will be increased.

Is buying gold on PhonePe safe?

When a customer buys gold on PhonePe, it is stored for free in a bank-grade insured locker provided by the suppliers, SafeGold and MMTC-PAMP India. The gold can’t leave the locker facility without being audited, thanks to IDBI trusteeship.

  • Super Quick & Easy
  • Stamped & E-Signed
  • Delivered Directly in Mailbox

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