What is digital gold and what are the pros and cons of investing in it?
Digital gold is a virtual method of buying and investing in the yellow metal without having to physically own the gold. You can buy it online. And the minimum buy or sell value is one rupee.
Why is this important?
There are some drawbacks to buying physical gold. First, there is the issue of identifying its purity and legitimacy. And, second, there are challenges associated with custody and storage.
On the other hand, digital gold is purchased online and stored in safes insured 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, which is 99.5% purity. In addition, the buyer can be assured of its purity as it is certified by government approved bodies.
There are other benefits to investing in digital gold.
On the one hand, the investor can take physical delivery of gold at his doorstep.
It is also very liquid. One can easily buy or sell units anytime and anywhere.
The digital gold that you have purchased can be used as collateral for online loans.
Not only is your purchase stored securely, it is also 100% insured.
Finally, you can exchange it for physical gold in the form of jewelry, coins, and bullion.
Digital gold: advantages and disadvantages
The investor can take physical delivery of the gold at his doorstep
Invest an amount as small as Re 1
Can be used as collateral for online loans
Digital gold is genuine and the purity is 24K
It is stored securely and is 100% insured
It can be exchanged for physical jewelry, gold coins and bullion
Limit of Rs 200,000 for investment on most platforms
Lack of official regulatory body like RBI or Sebi
Delivery and manufacturing charges may apply
Sometimes companies offer a limited storage period
In India, three main companies offer digital gold: MMTC-PAMP India, Augmont Gold Ltd and Digital Gold India.
Meanwhile, apps like PhonePe and Paytm provide a platform for investing in digital gold.
In August 2021, the exchanges asked stock brokers to stop selling digital gold.
The directive is said to have reached the stock exchanges of the Securities and Exchange Board of India. Subsequently, the exchanges sent a circular to brokers to comply with the guidelines.
As a result, stock brokers have stopped selling digital gold, while mobile wallets and investment platforms continue to do so.