Guide to Buying and Selling Bullion: Tips and Strategies
July 23, 2024Is Digital Gold a Safe Investment to Create Long-Term Wealth?
Introduction
We value gold, whether for investment or as a symbol of heritage. Investment in gold is in high demand and at the same time, we have a large majority of the world's millennial population. The combination of these two significant factors has provided Digital Gold with an ideal environment to thrive.
Digital gold offers investors the same benefits of owning physical gold, without the hassle of verifying its purity or worrying about its safety. Additionally, it eliminates the reduced returns associated with the depreciating value of gold as jewelry.
To learn whether digital gold is a safe investment or not, we discuss in this blog about digital gold, its benefits, risks, and tips for investing in it.
What is Digital Gold?
Digital gold is a virtual version of physical gold. It holds the same value as if you purchased it in person. Digital gold is securely stored in a protected vault, and you can sell any portion of it at current market prices.
You can choose digital gold instead of buying physical gold. You can buy it online and the same amount is stored as physical gold by your merchant in a secure vault. The minimum amount you can buy is as low as one rupee.
You can sell all or a small part of the gold at any time at the prevailing market rates. When your digital gold is converted to physical gold, it is 24K and backed by the government, ensuring purity and eliminating the risk of fraud.
Is Digital Gold a good investment?
Let’s examine the benefits and related risks of investing in digital gold, and then we can decide whether digital gold is a good investment or not.
Benefits of Digital Gold
Convenient
Investing in digital gold eliminates the need to physically purchase and search for storage spaces, as the merchant takes care of storage and security, often covering the convenience and other related fees, making it a quick and convenient experience.
Ease of Operation
In addition to being easy to own, digital gold is also much simpler to buy and sell. You can complete these transactions anytime and anywhere with just a tap on the screen.
Cost-Effective
When buying physical gold, there are purity assessment tests, commission fees, and making charges involved. Instead, Digital gold, with its 24K, 999.9 purity grade, eliminates the middleman, making it a more cost-effective option.
Secure storing
The merchant securely stores high-quality gold in vaults, eliminating worries about theft or loss. Plus, you can avoid storage fees for physical gold.
No Minimum Investment Limit
There is no minimum limit on investment in digital gold. You can invest any sum, even as low as Re. 1.
Use as Collateral
Digital Gold can be used as financial collateral due to its high purity and safe storage. Lenders see it as an asset, eliminating the need for traditional paperwork and lowering the risk of a credit denial.
Easy Exchange
You have the option to exchange digital gold for physical gold. This means that digital gold provides flexibility in trading and the option to have physical gold delivered to your doorstep.
Authenticity
Digital gold is 24K and has 99.99% purity. Buyers can rely on the authenticity and purity of the gold, as it is certified. The chances of fraud are significantly reduced, ensuring that buyers receive the full value of their investment.
Additionally, digital gold has no storage costs, provides real-time market prices, and allows for easy buying and selling from anywhere. It is also used as a gift for special events such as weddings. However, there are plenty of risks with digital gold. Let’s discuss them.
Risks with Digital Gold
Lack of Regulation
There is no regulatory body monitoring the trading rules and regulations for digital gold. This creates vague situations that can be exploited by dishonest individuals within the system and poses a risk to investors.Limited time for storage
Digital gold, like physical gold, is kept in safe and protected vaults once bought. Some platforms/sellers have a deadline for how long it can be stored. When this deadline passes, you'll need to either withdraw or sell the gold. This could impact your investment plans.The maximum limit for investment
Automated gold investment often comes with a maximum limit. Currently, most platforms have set a maximum investment cap of Rs. 2 lakhs. This limits your options for making large investments in digital gold and earning potential returns.Low Liquidity
During times of emergency, possessing physical gold as a guarantee or for sale is regarded as one of the most secure alternatives. But with digital gold, you don't have direct access to the physical gold, which can make it hard to use when you need it. The liquidity of the digital gold is concerning and can affect the ease and speed of converting it into physical gold or cash.How to invest in Digital gold?
Every time you purchase digital gold, the seller will keep an equal amount of physical gold in a secure vault. You can invest as little as Rs 1 in digital gold, but you can only buy it from MMTC-PAMP, Safe Gold, and Augmont Gold or their agents and brokers.
All digital platforms that sell digital gold are partnered with one of these companies. They let you buy, sell, or exchange digital gold for physical gold. To invest in digital gold through these platforms, you need to complete your KYC (know your customer). Once your identity is verified, you can start investing in digital gold.
Is digital gold a safe investment?
Being able to trade digital gold anytime and anywhere has made it popular among digital natives who are now focusing on short-term analysis and building their long-term investment portfolio.
Similarly, the younger generation prefers to make investment decisions at the right time rather than on favorable days. This highlights the need for quicker transactions, which would not have been possible with physical gold, and has led online users to quickly embrace investing in digital gold.
Gold investments have always been considered a flexible and secure option, making them a popular choice for portfolios of all ages. Even though the way gold is invested may change, the interest in gold itself is unlikely to fade, especially for those looking to include it in their long-term financial plans.
As the average age of investors changes, their preferred approach to managing money will also change. While gold will always hold value in every portfolio, traditional gold investment models are likely to become outdated with the advancement of technology. Investing in digital gold for long-term financial growth is a smarter and safer move nowadays.
However, you need to be aware of the risk factors included in digital gold investments, especially when you are investing more than enough. Therefore, we have provided here some tips and lessons for diversifying your digital gold investments.
Tips for growing your digital gold
- You can start investing in digital gold with just INR 10. Save a small amount every month to purchase digital gold alongside your other investments.
- Be sure to buy high-quality gold only from reliable, trusted platforms. Verify if the platform is affiliated with a reputable gold supplier like MMTC-PAMP, Safe Gold, and Augmont Gold.
- Pay attention to the possibility of hidden fees when investing in digital gold. Make sure to disclose fees like Goods and Services Tax (GST) upfront.
- Selling digital gold results in capital gains. If sold before three years, tax is based on income level. However, if sold after three years, the tax is 20.8% with indexation.
- It's recommended to keep your digital gold for at least five to
- 10 years, and even longer if you can, to protect against risks.
Conclusion
The world is rapidly shifting from traditional physical resources to digital ones. Despite drawbacks like investment limits and lack of regulation, virtual gold is a lucrative option for investment. It provides flexibility, purity, and good value for money as a return on investment.
Digital gold can be a smart investment depending on individual circumstances. While it offers advantages like secure storage and ease of exchange, there are risks such as regulatory barriers and market volatility.
Consider factors like investment goals, risk tolerance, and research that are crucial in determining your suitability for digital gold. Seeking professional advice and diversifying investments is also important. Ultimately, carefully assess the potential benefits and risks before deciding if digital gold meets your needs.
We, at Shree Ambica Touch, provide expert services related to the gold industry. Contact us to learn more.
