Physical Gold Or Digital Gold? Which One Is Best?

Gold is one of the most auspicious and precious metals for centuries around the globe because of its rich properties. Especially in India gold is the most celebrated material for jewelry. It has also been a safe way of investing money to earn returns. Purchasing physical gold in the form of bars, coins, and jewelry has been a popular trend in India for a long time but recently a shift in the trend has been traced. This generation of working-class people has started using digital gold like gold bonds for investing their hard-earned money. The additional return of 2.5 percent on gold bonds has been attracting investors. Many are confused about whether to invest in physical gold or digital gold. Let’s dive into both the forms individually to finally come to some clarity on which one suits the best.

What is physical gold?

Physical gold can be purchased from any jewelry shop, bank, or any such financial institution in the form of bar, coin, or jewelry. The value of gold appreciates as the price of gold increases.

What are the advantages and disadvantages of physical gold?

There are many advantages and disadvantages to be considered before investing in physical gold:

Advantages
1. Acts as a protection in times of inflation.
2. Security value.
3. A convenient option for investment.
4. Easy to encash when needed.

Disadvantages
1. Difficulty in storage.
2. Threats like theft.
3. It does not earn a passive income.
4. Additional costs like taxes have to be paid.

What is digital gold?

A digital form of gold is a commodity to invest in the gold metal by paying small payments for a duration and earning returns. Digital gold can be purchased in the following ways:

1. Gold Exchange Traded Funds or EFTs
2. Gold Mutual Funds
3. Gold Future Contracts
4. Sovereign Gold Bonds

What are the advantages and disadvantages of digital gold?

Advantages

Here are some of the benefits of investing in digital gold:

1. A secure and safe option as it involves a lot of regularities.
2. Taxation might or might not be there based on current budget facilities
3. It can be liquidated easily.
4. No storage required.
5. Offers 2.5% of annual interest rate based on current financial rules.
6. Less impact of market fluctuations.

Disadvantages
1. Cost of acquisition is higher.
2. Cannot be converted into physical gold.
3. High volatility.
4. Lack of awareness can lead to scams and frauds.

Physical gold and digital gold have their share of benefits and risks when it comes to investment. One should consider all the risks and research properly before investing in either of the two. It is however hard to conclude and choose one of them as best as both can serve the purpose in different scenarios.