Gold gives you freedom and security, so investing in it is a great idea. It has served as a hedge during economic crises and provided investors a safe haven and a guarantee for the future.
In the past, you could only buy this precious metal in its physical form: coins, bars, and jewelry. While this method had its advantages, it also came with disadvantages like the cost of storage and the risk of theft. For this reason, many people would not purchase gold.
So in these times, when the world is becoming increasingly digital, it is not surprising that our favorite investment vehicle, gold, now has a digital format.
The big question now is which digital and physical gold should you buy? Both forms have advantages and disadvantages; the best option depends on your needs.
As you continue reading, you will discover the best option, but first, let’s look at the two forms and the benefits they offer.
Physical Gold
Physical gold is the oldest form of gold investment. It has been used as a legal tender and has grown in value over time. Demand for it continues to increase as more and more people use it to diversify their portfolios.
Physical gold can be purchased in three main forms; coins, bars, and jewelry. The great thing about physical gold is that you hold a very liquid metal that can be easily exchanged for cash.
However, you are liable to pay capital gain tax when you sell your physical gold for cash. (But here is the way you can sell your gold without paying taxes).
Benefits Of Investing In Physical Gold
1. Because You Hold It, It Is Immediately Available
The best allure of physical gold investment is its tangibility. It is an asset you can hold and store. Because of this tangibility, it is also almost readily available when needed. Like many investors, you might want to keep your gold close to you.
However, this tangibility also means you have to spend on the storage of the Gold. It also puts you at risk of theft.
2. The Value Goes Beyond The Weight
For most forms of physical gold, the value goes beyond the weight. Gold always has and will always be in demand. Some of them are rare and have historical value, so their prices will be higher.
And because the value does not depreciate, you can still sell your physical gold during an economic crisis without making a loss.
3. Inheritance
People who invest in physical gold can easily pass them on to their loved ones. It is a great way to keep the wealth within the family but also ensures that loved ones are taken care of in the event of death.
This is usually done with luxury jewelry pieces left as heirlooms, but some people leave coins and bars.
4. The Price Does Not Easily Change
Unlike other traditional investment options, gold is not affected by inflation. You can always sell your gold to recoup the money you spent buying them.
Because it is not subject to change with the economy, you do not need to worry that the value of your gold will depreciate over time.
Digital Gold
Digital gold is a digital alternative to physical gold. It is also known as digital gold currency (DGC). It offers you the benefits of physical gold and more. It comes with reduced costs and higher accessibility.
Digital gold is an attempt at making gold investments more accessible and affordable to everyone. Physical gold might be tangible, but it comes with various disadvantages and risks that people cannot ignore.
For one, after paying for physical gold, you still need to pay for processing, storage, and insurance. All these disadvantages are eliminated with digital gold investments.
A single unit of digital gold is based on single physical gold bullion. So for each unit you buy, you have underlying gold bullion, which is removed after you sell.
Many companies offer digital gold investment services, and you can buy gold from as low as 0.01 gram. All you have to do is buy these digital gold units from these companies, and they will place them in a vault with your name on them.
Benefits Of Investing In Digital Gold
1. You Can Buy Any Quantity
There are no limitations on the amount of digital gold you can buy. You can invest any amount and start building your gold portfolio little by little.
It is cost-effective and inexpensive because you do not have to spend on insurance and storage. This opportunity is not usually seen with physical gold investments.
2. The Quality Is Guaranteed
All digital gold units are considered 24 karat units, so you do not have to worry about the quality or purity of your gold getting compromised.
3. Your Gold Is Secure
This is one advantage of digital gold investments over physical gold investments. You do not have to worry about the safety of your investment because the responsibility of protecting the gold lies with the dealer. Your gold units are stored in secure vaults and fully insured.
4. Extremely Liquid
Digital gold is extremely liquid. You can easily liquidate your gold in seconds, saving you money and time more than if you were trying to liquidate your traditional gold investments.
You can use your digital gold currency like that of fiat currencies while maintaining the intrinsic value and financial security that gold has.
5. You Can Redeem Them For Physical Gold
Most digital gold investment service providers also offer quick and easy redemption. You can get the physical equivalent of your gold delivered to you in the form you want.
6. Keep Track Of Your Investment
Buying digital gold online gives you the added advantage of tracking your investment. You can pay attention to the market and get a better insight into how well your investment is doing. You can also take advantage of the price movements and real-time rates to add more Gold to your portfolio.
7. Collateral For Loans
You can use your digital gold as collateral for loans because they are considered assets, just like your physical gold.
Learn more about digital gold and physical gold from this video:
Which Should You Invest In?
I cannot give you a definite answer to this question. The most important consideration is what you want to achieve with your investment. If you want to build wealth and fortify against inflation, digital and physical gold are great options.
Of course, each format comes with its advantages. Digital gold is more secure and offers more liquidity than physical gold. But physical gold gives you accessibility that digital gold cannot. However, you can always redeem your digital gold for physical forms.
Also, if you are looking to hold your gold for a long time, and maybe pass it down to loved ones after you are gone, then physical gold might be a better option. This is because digital gold is not regulated, and there is a certain number of years you are allowed to hold digital gold.
If you are new to gold investment, then digital gold might be the better option because of the ease of entry it offers investors. However, you should divide your gold investments into digital and physical if you can afford it.
Conclusion
Gold is becoming increasingly popular because of the stability it offers investment portfolios. A healthy portfolio should have at least 20% gold, irrespective of the form.
Both digital and physical gold comes with advantages and disadvantages. They are both great ways to build and protect your wealth. They do better than traditional investment options and are a great diversification vehicle.
Martin Thomas, the owner of Sutter Gold Mining, is a true gold investment aficionado. With decades of experience and a wealth of knowledge, he is the go-to source for anyone navigating the vast world of precious metals. Martin has dedicated decades of his life to understanding the intricacies of the precious metals market and the best strategies for maximizing returns. His expertise in this field is unmatched, and his commitment to helping others make informed investment decisions is unwavering. With him as your guide, you’ll gain a deeper understanding of the gold market and learn how to make smart investment choices that will benefit you for years. With his guidance and wisdom, you will never have to worry about taking the wrong investment step again.
