Digital gold vs physical gold: Which one should you buy this Diwali?

From elegant jewellery to gold coins, the yellow metal sees a surge in demand around this time of year.

"The festive season always inspires a spirit of celebration and self-expression, and this year we are seeing buyers gravitate toward meaningful, beautifully crafted jewellery. With gold prices firm and demand for bespoke design rising, customers are willing to pay a little more for creations that reflect individuality and emotion," said Mira Gulati, Principal Designer & Founder, Mirari.

While physical gold continues to charm with its beauty, in recent years, more and more people have started exploring digital gold, not just for convenience but also as a smart way to invest in gold without physically holding it.

Digital gold remains largely unregulated, and while sellers often claim their gold is stored securely in vaults, there’s no formal oversight to verify these assurances. Additionally, digital gold is currently being sold at significantly higher prices compared to traditional gold.

With physical gold, especially jewellery, there is always the risk of impurity or undercarating. Digital gold eliminates this concern as it is guaranteed to be 24K with 99.9% purity.

Both physical and digital gold attract a 3% GST at the time of purchase and are subject to capital gains tax based on the holding period.

While physical gold remains popular for traditional use like jewellery and gifting, digital gold is emerging as a modern investment choice due to its safety and ease of access.

Digital gold and gold ETFs are two different ways to invest in gold without physically holding it, but they work quite differently.

Digital gold allows you to buy gold online in small quantities, with the gold supposedly stored securely in a vault by the seller. You often have the option to redeem your digital gold for physical coins or bars. These are usually offered through fintech apps or online platforms and tend to be less regulated, sometimes coming with higher prices or premiums.

On the other hand, gold ETFs (Exchange-Traded Funds) are investment funds that trade on stock exchanges and represent ownership in gold held by the fund.

You buy and sell ETF units like stocks, and these are regulated by market authorities, making them more transparent and generally more cost-effective.