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Volume IconWhat is digital gold and what are pros and cons of investing in it?

Can you buy gold for one rupee? At least not at your conventional jewellery store. But you can buy digital gold online for as little as one rupee. But what exactly is digital gold? Here's an explainer

ImageBhaswar Kumar New Delhi
Gold

Digital gold is a virtual method of buying and investing in the yellow metal without having to physically hold the gold. You can buy it online. And, the minimum buy or sell value is one rupee.
 

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Why is this important?
 
Buying physical gold has certain downsides. Firstly, there is the issue of identifying its purity and legitimacy. And, secondly, there are challenges associated with safekeeping and storage.
 
On the other hand, digital gold is bought online and it is stored in insured vaults by the seller on behalf of the buyer.
 
And what about the purity of the gold in question?
 
The metal purchased is 24k gold, or 99.5 per cent pure. Also, the buyer can be assured of its purity as it is certified by government-licensed agencies.
 
There are other benefits of investing in digital gold.
 
For one, the investor can take physical delivery of the gold at his or her doorstep.
 
It is also highly liquid. One can easily buy or sell units anytime and anywhere.
 
The digital gold you've bought can be used as collateral for online loans.
 
Not only is your purchase stored safely, but it is also 100 per cent insured.
 
Last but not least, you can exchange it for physical gold in the form of jewellery, coins and bullion.
 
Digital gold: Pros and cons
 
Pros:
·        Investor can take physical delivery of gold at his doorstep
·        Invest an amount as small as Re 1
·        Can be used as collateral for online loans
·        Digital gold is genuine and the purity is 24K
·        It is stored safely and is 100% insured
·        It can be exchanged for physical jewellery, gold coins and bullion 
 
Cons:
·        Rs 200,000 limit for investment on most platforms
·        Lack of official regulating body like RBI or Sebi
·        Delivery and making charges can apply
·        Sometimes, companies offer limited storage period
 
In India, there are three main companies that offer digital gold -- MMTC-PAMP India, Augmont Gold Ltd and Digital Gold India.
 
Meanwhile, applications such as PhonePe and Paytm offer a platform for investing in digital gold.
 
In August of 2021, the exchanges asked stock brokers to stop selling digital gold.
 
The directive reportedly came to the exchanges from the Securities and Exchange Board of India. Subsequently, the exchanges sent a circular to brokers to comply with the guidelines.
 
Therefore, stock brokers have stopped selling digital gold, while mobile wallets and investment platforms continue to do so.   

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First Published: Nov 09 2021 | 8:45 AM IST

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