Investing in Digital Gold? Know where to buy, how it works, benefits and other details

October 30, 2021 Trading 3 min read
Investing in Digital Gold? Know where to buy, how it works, benefits and other details


Gold has been India’s favorite investment asset for a very long time. Every festive season, most of the households in the country buy some quantity of the precious metal. The old generation was put into the habit of saving and investing by asking them to buy gold during the festive season as it is considered auspicious. 

The younger generation that is influenced by logic, always questions the age-old traditions and finds more rational and convenient ways of following rituals. That along with smart devices in everyone’s hands has led to the introduction of digital gold. Curious about knowing more about digital gold investment? Let us explore more about it.

Digital Gold

Wondering what digital gold is? Well, digital gold is a virtual gold product that lets the buyer stock up gold by doing away with all physical stores and safe houses. The seller parks the quantity of such gold sold to the buyers aside on their behalf. Investing in digital gold has no upper or lower limit. Buyers can buy a small quantity of say ₹100 as well.

To buy and trade in digital gold, all you need is an internet connection and m-banking to make payment. Nowadays, even electronic wallets like Paytm and Google Pay are offering a platform for investing in digital gold. Wondering how exactly can you buy and trade in digital gold? It’s very simple.

How to buy and trade in digital gold?

The initial step required to start investing in digital gold is to go to the website or application of FinTech that offers such a service. This is the best way to invest in digital gold.

You can decide the amount you want to invest or the number of grams you want to buy. From as low as a hundred rupees to having no upper limit, you can invest any amount that you desire. The transaction executes at the current market price prevailing at the time of buying.

Once the payment and KYC procedure is done, you get virtual possession of digital gold. It is safely stored on a virtual platform, and when you get the desired price, you can immediately sell it and book the profits.

Later if you decide to get physical possession of the gold, you can get it delivered and store the physical yellow metal with yourself.

Benefits of investing in digital gold

By now, you must have gauged the benefits of investing in digital gold rather than buying it physically. Let us enlist them below:

  • Safety: You can have it safely stored virtually without the hassle of securing it in a locker.
  • Convenience: You can conveniently invest as small as ₹100 anytime you want from anywhere.
  • Easy sell or redeem: You can easily sell the gold anytime you get a good price or get it delivered physically.
  • Pure quality: Digital gold is one hundred percent pure and you don’t have to worry about the authenticity of gold.
  • Insurance: Gold saved virtually is fully insured. One can relax and enjoy the benefit of investment without worrying about asset safety.

Risks of investing in digital gold

When it comes to any kind of investment, the one major safeguarding factor is the market regulator. Like there is SEBI to regulate the stock market, investing in digital gold is not regulated by any authority. This is one of the major risks involved in digital gold investment

Storage of equivalent quantities of physical gold is handed over to the third party after you have made the purchase virtually. Though it is insured, there is some risk involved in it.

Usually, a person is appointed to verify the quality and quantity of gold bought by an investor. But no authority supervises the responsibilities of such appointed personnel.

Cost of investing in digital gold

Following are some of the costs involved in buying digital gold.

  • Tax component: While buying digital gold, GST at three percent is applicable. The investor buying digital gold has to pay the indirect tax similar to buying gold from a shop. Tax is charged irrespective of the way an investor chooses.
  • Storage cost: When you invest in digital gold, the seller has to safely store the quantity of gold that you bought in a vault. These vaults are not owned and maintained by them. Instead, they delegate this to the third party via contract. The investor has to bear the charges for such storage. Some platforms do not charge you anything initially for two years. Also, if the quantity of gold is below 2g, a charge of 0.05% is levied on the investor. Some platforms do not charge anything for storage.
  • Physical delivery is chargeable: If you decide to take physical possession of your gold investment at any time, you can get it delivered to your location. Such deliveries are chargeable. This is one of the additional costs involved in digital gold investment. 
  • Additional charges after the tenure: Typically, virtual gold products have a limit on the duration for which they can be held. This means within that time, the investor has to either take delivery or sell the gold. Say the investor has a choice to either hold or sell for five years. Post that, extra charges are imposed if delivery is not taken.

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