Investment word of the day: Digital gold — key features you must know ahead of Akshaya Tritiya

Gold has always remained one of the most sought-after investment tools for Indian investors. With Akshaya Tritiya around the corner, this yellow metal has gained significant attention among Indian investors.

However, with the evolution of the financial landscape, buying gold does not always refer to physical metal. It can also include digital gold, which allows investors to own gold without holding it physically.

What is digital gold?

Digital gold is an online platform that enables people to buy, sell, and hold gold in electronic form. This platform helps people own gold without the need to store it like a physical metal. Investors can invest in digital gold through online platforms or mobile apps.

Features of digital gold

• Purchase: To invest in digital gold, an investor has to register on a digital gold platform, usually provided by financial institutions, fintech companies, or online marketplaces. After registration, an investor can buy digital gold according to their needs. The online platform then allocates the quantity requested in digital form.
• Pricing: Digital gold is priced according to the prevailing market pricing of gold, which is updated in real time.
• Fractional amounts: Digital gold can be bought in fractional amounts, unlike traditional gold purchases, which require a significant investment. Investors can buy tiny fractions of digital gold as well.
• Selling: Similar to purchasing digital gold, its sale can be made anytime through the online platform. Upon selling digital gold, the amount is credited to the individual's account. It provides relatively higher liquidity, allowing an individual to convert digital gold into cash quickly.
• Conversion to physical gold: Some online platforms enable the redemption of digital gold for physical gold. Hence, investors can convert their digital holdings into an equivalent amount of physical gold bars or coins. However, it must be noted that redemption options may vary across various platforms and involve additional fees as well.

How is digital gold different from traditional gold?

One of the most significant differences between traditional gold and digital gold is their form. Solid gold refers to physical bars or coins, while digital gold signifies ownership of gold stored in secure vaults electronically. Digital gold aims to offer convenience, liquidity, and seamless transactions without the need for physical possession, appealing to modern investors.

Disadvantages of digital gold

• Platform reliability: Investors may often face the dilemma of trusting a reliable platform to purchase digital gold. Investors have to rely mainly on a platform's integrity and security measures to keep their investments safe.
• Security: Concerns may arise regarding cyber risks such as hacking or fraud, which may pose a possible threat to investors.
• Lack of physical ownership: Digital gold does not give physical access to gold, which may become a concern for those investors who want to own tangible assets.

Disclaimer: This article is for informational purposes only and does not constitute financial advice; please consult a qualified financial advisor before making any financial decisions.