Gold has always been a reliable investment option in India. Gold is purchased for various purposes such as safety, tradition, gifting, and investment. Currently, investors have two investment options: physical gold and digital gold. Which one is better for you?
The answer to this question depends on several factors such as storage, purity, liquidity, costs, security, and intended use of gold. We will understand both options in simple terms.
Are Physical Gold Investments Better Than Digital Gold?
There is no single right answer.
- Physical gold is better if you want to touch and own gold, use it as jewellery, or gift it.
- Digital gold is better if you want easy, small, and flexible investments without storage worries.
Let us learn more about both types of gold below.
What Is Physical Gold?
Physical gold means real gold that you can see, touch, and store. It includes:
- Gold jewellery โ rings, bangles, necklaces, etc.
- Gold coins โ usually 24K purity and easy to resell
- Gold bars (bullion) โ 24K (99.9% purity), mainly for investment
Types of Physical Gold
- Gold bars: Rectangular blocks used only for investment. Available from 1 gram to 1 kg.
- Gold coins: Minted coins, usually 24K, and have good liquidity.
- Gold jewellery: Mostly 22K (91.6% purity), mixed with other metals for strength.
Important Points About Physical Gold
- Coins and bars are better for investment because they are 24K and have lower making charges.
- Jewellery loses 10โ15% value on resale due to making charges, wastage, and melting costs.
- Physical gold is not dependent on apps, platforms, or digital systems.
- There is no counterparty risk, as you fully own the gold.
However, you must take care of:
- Storage costs (home locker or bank locker)
- Risk of theft or damage
What Is Digital Gold?
Digital gold is an online investment in 24K gold. You do not hold the gold physically, but it is stored safely in insured vaults by the platform.
Key Features of Digital Gold
- You can start investing with as little as โน10โโน100
- Gold is bought in grams or rupees
- Available anytime, anywhere through apps or platforms
- The gold backing your investment is 99.9% pure and stored in secure vaults
- You get digital records of your gold holdings
Some platforms also allow:
- Conversion of digital gold into physical gold (coins or bars)
- Selling gold instantly at market prices (after accounting for the spread)
Regulation Status
- Digital gold is not regulated by SEBI or RBI
- No formal investor protection or grievance system
- Platforms decide storage rules, delivery terms, and custody norms
Many platforms offer free storage for 3โ5 years. After that, you must either sell, take delivery, or pay storage fees.
Physical Gold vs Digital Gold: Comparison Table
| Criteria | Physical Gold | Digital Gold |
|---|---|---|
| Form | Jewellery, coins, or bars | Digital ownership backed by physical gold |
| Purity | Jewellery: 22K; Coins/Bars: 24K; BIS hallmarking applies | Usually 24K (99.9%) |
| Minimum Investment | Usually 1 gram or more | As low as โน10โโน100 |
| Storage & Safety | Home or bank locker; theft risk | Stored in insured vaults |
| Liquidity | Moderate; depends on jeweller | High; quick online selling |
| Costs & GST | 3% GST on gold; 5% GST on jewellery making charges | 3% GST on purchase |
| Taxation | Same for both (STCG & LTCG rules apply) | Same as physical gold |
| Regulation | No single financial regulator | Not regulated by SEBI/RBI |
| Usage | Wearing, gifting, ceremonies | Investment-focused |
| Ideal For | Tangible ownership seekers | Convenience-focused investors |
Physical Gold vs Digital Gold: Comparison That Matters to Investors
1. Costs
Physical Gold
- Jewellery making charges: 8โ25%
- Coins/bars premium: 1โ10%
- Storage and insurance: โน2,000โโน15,000 per year
Digital Gold
- 3% GST on purchase
- Buy-sell spread: 2โ5%
- Storage cost after free period: 0.5โ1% annually
- Extra charges for physical delivery, if opted
2. Purity and Authenticity
Physical Gold
- Purity depends on the seller
- BIS hallmarking is important
- Requires testing and verification
Digital Gold
- Usually 24K (999 purity)
- Backed by audited vaults
- Certification must be verified from the platform
3. Liquidity and Resale
Physical Gold
- Resale spreads can be 5โ10%
- Jewellery resale involves deductions
- Depends on jeweller policies and negotiation
Digital Gold
- Easy and quick resale through the platform
- Prices linked to real-time gold rates
- Platform rules and spreads apply
4. Safety
Physical Gold
- Risk of theft or loss
- You manage storage and security
Digital Gold
- No physical storage risk
- Involves platform and counterparty risk
Use Cases: When to Choose What?
When Physical Gold Makes Sense
- You want tangible ownership
- You are buying gold for gifting or ceremonies
- You want an heirloom or personal use asset
- You prefer zero counterparty risk
When Digital Gold Makes Sense
- You want to invest small amounts regularly
- You prefer online convenience and flexibility
- You want high liquidity and easy tracking
- You want to avoid storage and making charges
Note: Digital gold is unregulated in India. So, platform credibility is very important.
Regulated Digital Alternatives to Consider
If regulation is a concern, you can consider:
Gold ETFs
- Regulated by SEBI
- Traded like stocks on exchanges
- High liquidity
- Suitable for SIPs and short-term trading
- Expense ratio applies
Electronic Gold Receipts (EGRs)
- Represent physical gold in SEBI-approved vaults
- Option to convert to physical gold
- Lower liquidity than ETFs
- More regulated than digital gold
Conclusion
Physical gold is strong for various reasons, including cultural, emotional, and personal reasons. It provides actual ownership with no counterparty risk. It is the best option for gifting, jewelry, and investment purposes.
Digital gold is suitable for new-age investors seeking flexible, small-ticket investments with no storage issues. However, it has risks associated with the platform and regulations, as SEBI or RBI does not regulate it.
- Choose physical gold for tradition and personal use
- Choose digital gold for convenience and investment efficiency
- Choose gold ETFs or EGRs if you want regulated, market-linked options
In the end, the best choice depends on your goals, comfort level, and investment style.
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