Digital gold has changed how we buy, sell and store gold. It is no longer limited to visiting a jeweller. You can now also buy gold online, in small amounts, without worrying about where to store it.
Digital gold has allowed more people to invest in this precious metal for different purposes. But what is digital gold, and how can you use it best? Let’s find out.
Here are the details.
What Is Digital Gold?
The digital gold meaning is simple. You buy gold online, but instead of storing it physically, it is held in a professional vault under your name. The gold is guaranteed to be 24K pure gold. You can buy digital gold in fractions of a gram and start with a very small amount. Some platforms even allow you to start with a minimum investment of 0.001 gram.
How Does Digital Gold Work?
Steps to Buy and Sell Digital Gold
- Open a digital account on a platform of your choice. Many UPI apps and digital wallets support digital gold transactions.
- Choose the amount you wish to invest or the quantity of gold you want to buy. You will see the final amount based on the live market rate plus 3% GST.
- You can also choose monthly SIP plans to invest in digital gold. GST applies to every SIP payment.
- As soon as you make the payment, a custodian holds the equivalent quantity of gold you bought in a secured vault under your name.
- The digital gold balance starts reflecting in your account. This lets you track its current value based on the live market price.
- At any time, you can buy more gold or sell your existing holdings. However, you cannot recover the GST charges paid during your purchase.
- You can also redeem your gold in physical form, but you must meet the platform’s minimum weight requirement.
Charges Involved in Buying and Selling Digital Gold
- GST: 3% GST is applicable when buying digital gold. If you redeem it as gold coins or bars, you will pay an additional GST on the making charges.
- Making and Delivery: If you convert your digital gold into coins or bars, the platform levies a minting/making charge, plus a delivery fee and likely insurance.
- Storage Charges: It is an annual charge for storing your gold beyond the initial free period. Generally levied as a percentage of your holding.
- Buy-Sell Spread: This is a hidden cost. The amount at which you buy digital gold is slightly higher than the price at which you sell it. It can vary from 2–6% depending on the platform.
Digital Gold vs Physical Gold
Both digital gold and physical gold give you ownership of gold, but the way you buy, store and use them is different. Here is a simple comparison of digital gold vs physical gold.
| Factors | Digital Gold | Physical Gold |
|---|---|---|
| Buying Process | You can buy it online through a digital platform. | You buy it from a jeweller or authorised seller. |
| Storage | The provider or custodian stores it in a secure vault. | You need to store it yourself, such as in a locker or safe. |
| Purity | It is guaranteed 24K pure gold. | Depends on the type of gold you buy. |
| Liquidity | High liquidity. Can be sold anytime through your account. | Comparatively less liquid. You need to find a jeweller, dealer or other buyer to sell it. |
| Minimum Investment | You can buy fractions of a gram for as low as ₹1. | You generally need to buy a minimum of 1 gram. |
| Making Charges | No making charges unless you redeem it. | Includes making charges for jewellery and gold coins. |
| Physical Possession | You do not physically hold the gold unless you redeem it. | You have the gold with you after purchase. |
| Gold Loan | Cannot be used for a gold loan unless redeemed. | Can be pledged for a gold loan. |
Benefits of Digital Gold
The benefits of digital gold mainly come from the convenience it offers when you want to buy and hold gold as an investment for your future needs.
- Easy to purchase: You can buy gold online without visiting a jeweller.
- Low entry amount: You can start with a small amount and buy fractions of a gram.
- No personal storage: You do not need to arrange a locker or safe to store the gold.
- Easy buying and selling: You can buy or sell your gold through the platform without handling it physically.
- Gradual accumulation: You can buy small quantities over time instead of making a large one-time purchase.
- Low risk: Since you are holding it digitally, there is no risk of theft or loss.
Things to Check Before Buying Digital Gold
- Check the provider’s credibility.
- Look for GST, storage fees, platform charges and any other applicable costs, as they can affect your returns.
- Find out where your gold is stored, who acts as the custodian and whether the stored gold is insured.
- Check both prices before buying. The price you buy at may be higher than the price you can sell at.
- If you want physical gold later, check the minimum quantity, available denominations, delivery charges and any applicable minting fees.
If you hold physical gold and need funds, consider the gold loan options offered by Manappuram Finance. You can easily check your gold loan eligibility and estimate your potential loan amount using our gold loan calculator.
*Terms and conditions applied