Gold has always been a top pick for investors in India, often seen as a safer option compared to stocks or bonds. The demand for gold continues to rise, with recent data showing a significant increase to 210.2 tonnes in Q3 of 2023. This surge is mainly due to the growing interest in gold bars and coins, which reached their highest levels since 2015. According to the World Gold Council, there's been a 10% jump in gold demand, highlighting India’s deep connection with the precious metal, especially during the festive season.
As more people turn to gold as an investment, new ways to invest in this timeless asset have emerged. Digital Gold, Gold ETFs, and Sovereign Gold Bonds (SGBs) are now making it easier than ever to own gold in modern, flexible forms.
But with so many options, how do you know which one works best for you? Which one offers a good return and fits your investment style? In this article, we’ll dive into these digital gold options, pointing out the benefits and helping you figure out which one suits your needs.
What is Digital Gold?
Digital Gold lets you invest in gold online using apps or websites. When you buy digital gold, you’re actually purchasing real gold that is safely stored in a secure vault on your behalf. It allows you to buy, sell, and hold gold in small amounts without worrying about storing it yourself. You can also choose to convert your digital gold into physical gold or sell it for money whenever you need.
Digital gold has become a top choice for many people looking to invest in gold online. It's a smart and flexible way to build wealth, and its growing popularity shows just how trusted and accessible it has become.
Digital gold platforms like Freo Money, you're getting 24K gold, which makes it more reliable and reduces the risk of fraud.
Who Should Invest in Digital Gold?
Digital gold is a great option for anyone looking to invest in gold without the complexities of owning physical gold. It's perfect for those who want to start small, with investments as low as Rs. 10, or for people who prefer the flexibility of buying and selling gold online. If you're new to investing or want a hassle-free way to diversify your portfolio, digital gold could be a smart choice.
What are Gold ETFs?
Gold ETFs (Exchange Traded Funds) are a convenient way to invest in gold without actually owning the physical metal. These funds primarily invest in gold bullion that is 99.50% pure, offering you exposure to the gold market. The beauty of Gold ETFs is that they allow you to buy and sell gold as easily as stocks, without the hassle of dealing with physical gold.
When you invest in a Gold ETF, you don't need to worry about storing gold or paying making charges, which often come with buying physical gold. It’s a digital alternative that gives you all the benefits of gold ownership with none of the physical complications. Whether you're a seasoned investor or just starting, Gold ETFs provide a simple and flexible way to diversify your investment portfolio.
Who Should Consider Investing in Gold ETFs?
Gold ETFs are a good choice for anyone looking to invest in gold without the hassle of storing physical gold. They’re great for people who want a simple way to add gold to their portfolio, whether to protect against inflation or to diversify their investments. If you prefer a more straightforward, digital approach to gold investing, Gold ETFs can be a good fit for you.
Difference Between Digital Gold and Gold ETF
Digital Gold is a way to buy and own gold online without needing physical storage, while a Gold ETF (Exchange-Traded Fund) is a financial instrument that tracks the price of gold and can be traded on stock exchanges.
Digital Gold vs Gold ETF
| Feature | Digital Gold | Gold ETFs |
|---|---|---|
| What It Is | A modern alternative to owning physical gold, where every unit is backed by 99.9% pure gold. | A fund that invests in physical gold (99.5% pure), and is managed by a fund house. |
| Who Provides It | In India, digital gold is offered by companies like Augmont, MMTC, and PAMP. | Offered by various Asset Management Companies (AMCs) in India. |
| How You Buy It | You can buy digital gold online through authorised platforms like e-wallets. | Gold ETFs are bought and sold on the stock exchange through a Demat account. |
| Minimum Investment | Usually starts from as low as ₹100. | Minimum investment is typically 1 unit, which equals 1 gram of gold. |
| Costs Involved | There’s a 3% GST on purchases. Additional charges for storage and insurance may apply. Delivery of physical gold also comes with extra charges. | ETFs have an expense ratio that is subject to SEBI rules. Transaction costs depend on your brokerage account. |
| Conversion Options | Digital gold can be converted into physical gold or even jewellery, depending on the platform. | You can’t directly convert ETFs to physical gold, but you can sell the ETF to buy physical gold. |
| Trading | Not traded like stocks, but bought and sold at the prevailing gold price. | Can be traded on the stock market. Prices may be higher or lower than the actual gold price due to the fund's Net Asset Value (NAV). |
| Regulation | Digital gold has unclear regulation and isn’t governed by a single regulatory body. | Gold ETFs are well-regulated by SEBI, making them more secure. |
| Tax Treatment | If held for less than three years, gains are taxed as per your income tax bracket. If held longer than three years, gains are taxed at 20% with indexation benefits. | Tax treatment is the same as digital gold: short-term gains are taxed based on income tax slab rates, and long-term gains are taxed at 20% with indexation. |
Benefits of Digital Gold and Gold ETF
- Ease of Investment
Digital Gold is easy to buy through apps and online platforms, and you can start with as little as ₹1.
For Gold ETFs, you need a demat account, but once you have it, buying and selling through the stock exchange is still simple.
- Storage
With Digital Gold, your gold is kept in secure, insured vaults by the service provider at no extra cost.
Gold ETFs, on the other hand, are backed by physical gold that is safely stored by professional custodians on behalf of the fund.
- Liquidity
Digital Gold can be sold instantly online, available 24/7 on most platforms.
Gold ETFs offer high liquidity as well and can be easily traded on the stock exchange during market hours.
- Purity Guarantee
Digital Gold usually comes with 99.9% pure 24K gold certified by trusted agencies.
Gold ETFs are backed by 99.5% pure physical gold held by the fund.
- Returns
Digital Gold prices update in real time according to the live market gold rate.
Gold ETFs reflect the actual market price of gold as they are traded openly on stock exchanges.
- Extra Costs
Digital Gold involves no making charges like physical jewellery.
Gold ETFs also avoid making charges, but you will need to pay small fund management fees.
Digital Gold vs Gold ETFs: What’s the Better Choice for You?
When it comes to investing in gold, both digital gold and gold ETFs may seem like similar options. But there are important differences that could make one better for you, depending on your needs.
With digital gold, you don't have to worry about purity or resale value since it's backed by actual gold. The best part? You can start investing with as little as Rs.100, making it an easy entry point for many. However, trading is still done at market prices, which means you’re not always getting a bargain.
One feature that sets digital gold apart is the option for physical delivery. This means you can have the gold delivered in the form of coins or bars. But here’s where things can get tricky: not all jewellers will accept these gold bars or coins to make jewellery, and they may even charge you extra to convert them. If you're thinking of buying jewellery, gold ETFs don’t offer this physical delivery option, but you can redeem your ETF for cash to buy jewellery without these hassles.
On the flip side, digital gold is not regulated by any government authority, which increases the risk for investors. There’s no clear structure in place, and you’re essentially trusting the platform offering it. Gold ETFs, on the other hand, are regulated by the RBI and SEBI, which brings more transparency and security to the table. These regulations make gold ETFs a potentially safer bet in terms of risk.
So, which one is better? It depends on what you’re looking to do with your investment. If you’re focused on holding actual gold in your hands, digital gold might appeal to you. But if you’re after a more structured, regulated investment with less risk, gold ETFs could be the way to go.
In the end, understanding your goals and the risks involved will help you make the right decision when it comes to investing in gold.
How to Start Investing in Digital Gold with Freo
Ready to invest in gold? It’s easier than you think with Freo! Just follow these simple steps to get started:
- Go to the Freo homepage and click on the Gold option.
- From there, select Digital Gold.
- Hit the 'Buy Now'button to start your purchase.
- You can choose to buy in Rupees (by entering the amount you want to spend) or buy in grams (by selecting how many grams of gold you want).
- After entering your amount or grams, hit Proceed.
- Click on 'Proceed to Pay' to move to the payment page. Just a heads-up, the price you see is valid for only 4 minutes, so don’t wait too long!
- Choose your preferred payment method and complete the transaction.
Frequently Asked Questions
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Is Digital Gold the Same as Gold ETF?
Digital gold and gold ETFs are both popular ways to invest in gold, but they cater to different needs. Digital gold is great for small investors who want flexibility and the ability to buy and sell gold in small amounts, anytime they choose. It’s more about convenience and liquidity. On the other hand, gold ETFs are better for those who have a demat account and want to trade gold during market hours. ETFs offer more transparency, making them a good choice for investors looking for a structured way to trade.
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Digital Gold vs SGB: Which One Should You Choose?
When it comes to choosing between digital gold and Sovereign Gold Bonds (SGBs), it really depends on your investment goals. Digital gold doesn’t have a lock-in period, so you can buy or sell whenever you like, and you can invest in small amounts. It's perfect for those who want quick access to their investment. On the other hand, SGBs are better suited for long-term investors. They require a minimum investment, and there is a lock-in period. While both options are safe, SGBs are a solid choice if you’re in it for the long haul.
