Gold has always been a reliable investment option for ages. People in India, even in today's modern world, prefer buying gold over other investment options. Since buying gold has several disadvantages associated with it, such as storage costs, risk of theft, selling difficulties, purity concerns, and authenticity issues, it has made it difficult for people to buy it. However, thanks to the advancement of technology, it has evolved in various ways to invest in gold digitally, eliminating the need to visit a goldsmith and worry about purity. People can now invest in gold digitally or through gold ETFs. It allows investors to bypass the need for physical gold. Now, when various options are available to invest in gold digitally, choosing a good option is often tough as all look tempting with the benefits they hold. Digital Gold Vs Gold ETFs: Which is good? To get the answer, keep reading the article further.
Digital Gold
Digital gold is an electronic form of investing in gold that allows investors to buy, hold, and sell gold without owning it physically. Means it is a digital representation of gold, often secure and convenient than owning gold metal. Unlike physical gold, it can also be bought in small dimensions such as grams, though online platforms or using a mobile app.
Gold ETFs
Gold ETFs are (Exchange Traded Fund) are an investment fund that allows investors to gain exposure to gold without owning it physically. It is traded on stock exchanges, unlike other regular stocks, and each unit of it represents a specific amount of gold. Investors can buy and sell it through stock exchanges, similarly to stocks. It is a more transparent medium of buying gold as its value is linked to the current market price of gold.
Key Difference Between Digital Gold Vs Gold ETFs
Digital Gold vs Gold ETF: Storage
Both digital gold and ETFs are kept securely in a high-security vault managed by appointed custodians and are insured and periodically valued. It is held by the asset management company that manages the ETF. While the gold itself is kept securely, its units are traded in the stock exchange like regular stocks.
Digital Gold vs Gold ETF: Trading Hours
Trading hours play a very crucial role in buying and selling it easily. Digital gold is more time-flexible than Gold ETFs, as it can be bought 24/7 without any restriction, whereas gold ETFs can only be bought during trading hours between 9:15 AM-3: 30 PM on weekdays.
Digital Gold Vs Gold ETF: Minimum Investment
Buying digital gold is more economical than Gold ETFs, as it can be bought as low as Rs. 1, whereas buying a gold ETF requires a minimum unit purchase, which can vary as per the current trading price.
Digital Gold Vs Gold ETF: Fees & Charges
The asset management companies charge additional fees when buying digital gold for the safety of the gold holdings. Similarly, buying a gold ETF also takes additional fees due to management and operational costs. Digital Gold has fewer charges compared to gold ETFs as it involves only storage fees, whereas Gold ETFs charge multiple costs, which include brokerage fees and fund management fees.
Digital Gold Vs Gold ETF: Liquidity
Liquidity is a highly important element when investing in any asset, as it offers access to the investor to buy or sell their investment when needed. Digital Gold and Gold ETFs are both highly liquid and can be sold and bought at any time. But, there is a time restriction associated with buying and selling of gold ETFs as it can be traded only during market hours (9:15 am to 3:30 pm) on weekdays.
Digital Gold Vs Gold ETF: Ownership
Ownership refers to the possession of physical gold, as investors traditionally used to have when buying physical gold. Both digital gold and Gold ETFs don’t give physical possession of gold, yet buying digital gold can be remunerated as coins or bars, but the gold ETFs don’t give any possession of physical gold; the investor owns only shares representing gold.
Conclusion
Gold is a medium of investment to generate a good return over a long period. Those who want to buy physical gold can invest in digital gold or gold ETFs, as they are more convenient and safer than buying physical gold. One can buy as per their investment goal. Both are good and can be liquidated at any time when needed. There are many good asset management companies through which one can buy it easily. Digital gold vs gold ETFs, which is better, is often tough, as both are good and offer good returns. Digital gold suits the small investors who can purchase in smaller amounts and can liquidate at any time, whereas Gold ETFs are suitable for those who already have a demat account and want to trade in gold like shares.