Digital Gold vs Gold ETF: Which is Better?

Every Indian prefers to have some investment in Gold, but they are scared of various types of expenses and unfair market prices. Therefore, for such investors, Digital Gold and Gold ETFs are the best investment option. 

In today’s blog post, we will give you an overview of Digital Gold and Gold ETFs, along with the differences and tell you which one is suitable for you.

Meaning of Digital Gold

Digital Gold is a modern and innovative way to invest in Gold. One can invest in this through an online platform. However, one is not required to hold the Gold in physical form. It allows you to buy small quantities of Gold through various online platforms. Whenever one makes a payment, an equivalent amount of physical Gold is stored in vaults by the provider. Whenever you want to receive physical gold delivery, you can have it delivered to your doorstep.

Features of Digital Gold

The key features of Digital Gold are as follows:

1. Backed by Physical Gold: Each unit purchased by the investor is backed by physical Gold.
2. Physical Gold: The units of digital Gold can easily be converted into physical Gold at the market rate.
3. Zero Making Charges: There will be zero making charges, unlike any jewellery.
4. Small Investment: One can do a fractional investment in digital Gold.

Meaning of Gold ETF

A Gold ETF or Gold Exchange Traded Fund is a category of mutual fund that primarily invests in physical Gold with a purity of 99.5%. Gold ETFs are traded on the stock exchange like any other stock. It tracks the domestic price of Gold and can be liquidated at any time during the market hours. Each unit of an ETF represents a specific amount of physical Gold.

Features of Gold ETF

The key features of Gold ETF are as follows:

1. Traded on Exchange: Gold ETFs are traded on the stock exchange like any other ordinary stock.
2. Lower Expense Ratio: The expense ratio of the Gold ETF is comparatively much less than any other form of digital Gold.
3. Brokerage Charges: One is required to pay brokerage charges on the Gold purchased from the exchange.
4.  Demat and Trading Account: If you wish to invest in a Gold ETF, you are required to open a demat and trading account with a broker.

Read Also: Gold ETF vs Gold Mutual Fund: Differences and Similarities

Difference Between Digital Gold and Gold ETF

The key differences between Digital Gold and Gold ETF are as follows:

Particulars	Digital Gold	Gold ETF
Meaning	Your investment in digital Gold is stored in a secure vault.	Your ETF units invest in physical Gold.
Application	It can be bought and sold on multiple platforms.	It can only be bought and sold through the Stock Exchange.
Regulations	There are no defined regulations related to digital Gold.	Gold ETFs are strictly regulated by SEBI.
Liquidity	One can invest in it anytime. There is no fixed time regarding the investment in Digital Gold.	Investment in an ETF can only be made during the market trading hours.
Cost	It generally has a higher cost.	It has a comparatively lower cost than digital Gold.
Suitability	Digital Gold is suitable for investors who do not have a demat account.	Investors who are familiar with the stock market and have a demat and trading account can consider investment in Gold ETFs.
Convertibility	They can be converted into physical Gold.	Gold ETFs cannot be converted into physical Gold.
Storage	The units of physical Gold are stored in vaults by the service provider.	They are held electronically in the investor’s demat account.

Which is Better for You

Choosing between Digital Gold and Gold ETFs depends on the investment objective of the investor. For a new investor who wishes to have physical Gold, Digital Gold can be a better option as one can invest with INR 1, and does not require to have a demat and trading account. On the other hand, if you are a long-term investor seeking to create wealth over time and have a demat and trading account, you may consider investing in Gold ETFs.

Read Also: SBI Gold ETF vs HDFC Gold ETF: Where To Invest?

Conclusion

On a concluding note, both digital Gold and Gold ETFs provide you with an opportunity to create wealth by getting the benefit of appreciation in Gold prices. Digital Gold is suitable for new investors who want a straightforward investment experience in Gold. Whereas, on the other hand, investors who are well versed with the concept of trading in stocks can invest in Gold through ETFs. However, both of them carry certain risks, and the allocation of Gold depends on the individual’s investment goal. Therefore, it is advisable to consult your investment advisor before making any investment decision.

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