Home / Markets / Commodities /  Digital gold: The unknown facts that all investors must be aware of

People have been investing in gold for ages, and the yellow metal has remained one of the popular asset classes in the country. Apart from the physical gold, there are other options to invest in yellow metal. In the last few years, the boom in the digital revolution expanded to the gold market, and it introduced a new form of investment - digital gold. Digital gold as a concept is quite new in India.

What is digital gold?

Simply put, digital gold is a mode of investing in physical gold. It is just like the regular gold, can be bought online and is stored in insured vaults by the seller on behalf of the customer. You can buy or sell 24 karat Hallmark gold for as low as 1. 

In an email interview with Mint, Gaurav Mathur, MD SafeGold talks about digital gold benefits, advantages, safety and the common misconceptions around them.

So in this article, we will try to bust some myths associated with Digital Gold.

Q How digital gold is different from physical gold?

Digital gold, simply put is vault-stored, 24K, pure gold that users can access via digital channels. Platforms like SafeGold enable customers to buy, sell and receive vaulted gold at low ticket sizes, around the clock, with the tap of a button. With this innovation, gold has become more functional, approachable and efficient.

Physical gold, on the other hand, is usually bought for ornamental purposes but cannot be considered a smart investment option. It covers many non-refundable fees such as making charges, storage costs etc., making it a liability rather than an asset. Moreover, holding gold in its physical form at home is fraught with risks.

The pandemic has accelerated the rising preference among users to transact and invest digitally, making digital gold one of the most popular investments.

Q Why should you invest in digital gold?

With digital gold, we offer customers a smart way to invest in gold. It is ideal for those customers who want the dual benefits of investing in gold as well as the option to easily take physical delivery. Indians are amongst the second-largest buyers of physical gold in the world. Apart from jewellery, we use it for gifting and as an integral part of every household’s assets. Digital gold is a safe, convenient and hassle-free way for those wanting to accumulate gold, with the eventual option for delivery.

The largest digital platforms in the country, including e-commerce portals, wealth management channels, banking and payment apps, are offering digital gold as part of their offerings. Over 100 million consumers own Digital gold today.

Q Is digital gold better than physical gold?

Gold is a popular investment among Indians and is purchased to commemorate every auspicious occasion and even passed on to future generations. The purchase of physical or digital gold depends on the need of the customer.

Physical gold is usually bought for consumption purposes, largely in the form of jewellery. It can be bought directly from a jeweller with no involvement of an intermediary.

However, there are some drawbacks to physically holding gold. One has to buy physical gold in multiples of 1gm (equivalent to approximately 4,500) compared with multiple of Re 1 when buying digital gold. In addition, jewellery and ornaments will come with high making costs and there is always the risk of theft. Selling physical gold involves a trip to a jeweller where digital gold can be sold anytime with money instantly credited to your bank account.

Digital gold combines the convenience and speed of the internet with the safety and security of traditional gold purchases. As an investment option, digital gold is considered to be safer and cost-effective. In short, if you’re sure of the jewellery you want, buy physical gold. If you want to accumulate gold and have complete flexibility over how to use this gold in the future – jewellery, gifting, investment or collateral for a loan - then digital gold is a great option for you.

Q How is it different from Gold ETFs and Gold funds?

Purity, convenience and liquidity are a few of the key factors that differentiate digital Gold from ETFs and Gold funds. Buying digital gold is as easy as purchasing clothes, food or recharge online. It can be bought online, stored in insured vaults on behalf of the customer, and can be purchased via multiple mobile e-wallets, UPI IDs or banks.

Q Currently, digital gold is not directly under the purview of any regulatory body. So there is an element of risk as rules are not yet in place yet? How safe is digital gold? 

Digital gold, being a relatively new offering in the country, does not have regulations guiding it yet. However, to safeguard customer interest, we at SafeGold have put in place several independent checks and balances through a Security Trustee, as well as an Independent Custodian. This ensures that customer gold balance is always safe and they do not take any risk on SafeGold. We believe in having robust systems that would protect customer interests.

According to recent industry reports, the regulators are looking at framing guidelines for the sector. Such a step is welcomed and will lay the foundation for the healthy growth of the digital gold space in the country. We look forward to working together with all regulators to build a transparent, seamless digital ecosystem in the country

Q Benefits of buying digital gold?

A few of the key benefits of investing in digital gold are:

Convenience: Consumers can buy digital gold from a variety of mobile wallets, UPI apps and banks such as PhonePe, Bajaj Finserv, MobiKwik & many more.

Authenticity: SafeGold sources gold bars that subscribe to the ‘Good Delivery’ standards and all the coins manufactured for are assay certified by a government licensed agency. All coins and bars are independently certified to ensure the highest purity of 99.99% 24K gold.

Liquidity: Customers can sell their gold for cash, via their bank account, through a live 24/7 market-linked rate

Safety: Gold corresponding to each transaction is already stored in the physical form in a secured vault with full insurance

Budget: Investing in Digital gold can be considered as a versatile tool to start a SIP or buy even for a nominal amount, as per the customer’s financial capacity  

Easy possession: Users can have gold delivered to their doorstep, at any time in a tamper-proof, insured package

Exchange for Jewellery: Digital gold can be simply exchanged for jewellery with partnered jewellers. At SafeGold we have partnered with CaratLane, Tanishq & Candere by Kalyan.

Gifting: Gold can also be gifted to loved ones digitally, anytime and anywhere, you can send someone gold over a Whatsapp message! 

Q The common misconceptions around Digital Gold?

A few of the common misconceptions are:

It is a paper certification of gold ownership: One of the most common myths is that when a customer invests in digital gold he/she does not own it physically. This is not true. Gold corresponding to every purchase, irrespective of the amount, is stored in a secured and insured vault. Customers can access and take delivery of the gold bought at any time.

Extensive documentation is required: A user just needs is a phone, access to the internet and a bank account or UPI. It is as simple as shopping online for any other product. Only in cases of the transaction exceeding 2 lakh, PAN card information must be provided. 

Online gold is not pure gold: SafeGold offers 24 Karat gold of 9999 purity (99.99% pure). All SafeGold coins and bars assay certified to ensure the highest purity.

Q How has the recent NSE guideline affected the gold market?

The stock exchanges (NSE and BSE) relayed a SEBI circular recently, asking brokerages to discontinue the sale of digital gold on their platforms. The SEBI directive was based on their interpretation of securities contract regulations which restrict stockbrokers to transact in regulated products. Every SEBI registered entity has to comply and work within the framework and guidelines issued.

While the revised regulations have restricted stockbrokers from offering digital gold, we have not seen a significant impact on the sale of digital gold. The yellow metal still remains one of the most sought forms of investment in India, and just as buying physical gold remains legal, the purchase of physical gold through digital means, also remains legal and safe.

Users who held digital gold on our platform, via stockbrokers were not impacted by this new directive. Digital gold bought via any of our authenticated partners are safely stored in a vault.

Q Tanishq and other big brands are selling gold as low as 100. What does this mean for the jewellery industry?

This is a positive development for the gold industry, as it democratising access to gold. Low ticket sizes dramatically expand the market size for the players in the sector.

With offerings like digital gold, people can invest in gold for as low as Re 1. It is a state-of-the-art product that allows customers to possess a traditional asset while reaping the benefits of cutting-edge technology. Digitisation of gold has encouraged an increasing number of users to adopt digital gold, given its versatile usage.


Sangeeta Ojha

Sangeeta is a Chief Content Producer at Livemint. Writes on personal finance, banking and real estate. She has over 12 years of experience as a journalist with television and digital media
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