What is digital gold and what are the advantages and disadvantages of investing in it?
Digital gold is a virtual way to buy and invest in the yellow metal without physically holding the gold. You can buy it online. And the minimum purchase or sale value is one rupee.
Why is that important?
There are certain drawbacks to buying physical gold. First, it is about establishing its purity and legitimacy. Second, there are custody and storage challenges.
On the other hand, digital gold is bought online and stored in insured vaults by the seller on behalf of the buyer.
And what about the purity of the gold in question?
The metal purchased is 24 karat gold, or 99.5 percent pure. In addition, the buyer can be sure of its purity, as it is certified by state-licensed authorities.
There are other benefits to investing in digital gold.
On the one hand, the investor can physically receive the gold on his doorstep.
It’s also very fluid. Units can be easily bought or sold anytime, anywhere.
The purchased digital gold can be used as collateral for online loans.
Your purchase is not only safely stored, it is also 100 percent insured.
Last but not least, you can exchange it for physical gold in the form of jewelry, coins, and bars.
Digital gold: pros and cons
· Investors can physically deliver gold on their doorstep
Invest an amount of only Re 1
· Can be used as collateral for online loans
· Digital gold is real and the purity is 24K
· It is kept safe and 100% insured
· It can be exchanged for physical jewelry, gold coins and bars
· Rs 200,000 limit for investments on most platforms
· Lack of an official regulatory authority such as RBI or Sebi
· Delivery and manufacturing costs may apply
· Sometimes companies offer a limited storage period
There are three main digital gold companies in India – MMTC-PAMP India, Augmont Gold Ltd and Digital Gold India.
Applications such as PhonePe and Paytm now offer a platform for investing in digital gold.
In August 2021, the exchanges asked stockbrokers to stop selling digital gold.
According to reports, the instruction came to the stock exchanges from the Securities and Exchange Board of India. The exchanges then sent a circular to the brokers to comply with the guidelines.
As a result, stockbrokers have stopped selling digital gold, while mobile wallets and investment platforms continue to do so.