Skip to main content

Digital Gold Trading, Pros & Cons


Despite the fact that gold is no longer used as currency, it can still be used to make money. According to one quotation, gold was the wealth of kingdoms and the symbol of rulers, and it was desired by many but owned by few. For a variety of reasons, gold is popular among investors, and it offers properties that make it a viable alternative to traditional securities such as shares and bonds. During difficult economic times or global crises, such as those involving Russia and Ukraine, investors usually look to gold as a safe haven. This article briefly describes digital gold and how it can be exchanged globally. Furthermore, the paper discusses the advantages and disadvantages of digital gold and its trading.

Digital Gold

Digital gold can be purchased online and stored in insured vaults on behalf of the consumer by the vendor. Simply defined, digital gold is a type of actual gold investment. Trading in digital gold is quite similar to trading stocks online with a stock exchange broker. It involves Internet/mobile banking, and one can invest in gold digitally at any time and from any location. When a unit of digital gold is purchased or sold, it is either debited or credited from the account. In general, units of digital gold are deliverable in the same way that commodities are delivered in online trading.

When investing in digital gold, unlike the old traditional technique of purchasing physical gold, the purity of the gold is no longer an issue. The security is excellent and free of robbery and theft because it is held in a dematerialization account /Demat account (allows investors to hold shares and securities in an electronic format) and cannot be traded by anyone other than the investor. Digital gold is easily traded and convertible into physical gold. For each gold unit purchased, investors must pay transaction fees, storage costs, and insurance charges.

Digital gold and E-gold concept

(1) The concept of digital gold is analogous to the concept of "e-gold - the first Digital Gold Currency (DGC)," a digital gold currency issued and managed by a private company on the basis of physical reserves of gold and silver, producing an electronic form of money for investment and trading. The e-gold project began in 1996 and failed in 2013. Due to a shaky network and inadequate KYC (know your customer), "e-gold" was unable to combat attacks from financial malware/phishing, making it a source of unlawful activities, investment scams, and frauds. The new approach would allow actual gold to be transferred as readily as digital currency, while also providing buyers with information about where the gold came from. Nowadays, the terms e-gold and digital gold both refer to a sort of virtual gold investment.

(2) Firms dealing in digital gold generally offer physical gold delivery; however, some of them act as custodians for their clients on behalf of gold mining/refining companies. Aside from Indian organizations involved in the digital gold market, The Royal Mint, UK, and APMEX (American Precious Metals Exchange) can also be referred to for e-gold commerce.

(3) According to business news published by TradeArabia.com (Manama, Bahrain) on June 23, 2020, IBMC Financial Professionals Group, an internationally recognized financial services institution and business consultants have collaborated with US Gold Currency and Block-fills to bring the world's first monetary gold-backed digital gold currency to the Gulf Cooperation Council (GCC), Middle East, and Africa. According to a statement, the money would also be implemented in India at the same time.

Impact of the digital world

I) With the advent of the digital age, digital gold is replacing physical gold as an investment vehicle, particularly in India, the world's largest importer of gold. Digital gold can be purchased online without concern for purity or theft, and it can be safely held in an insured vault given by the company to its customers. The holding, i.e. units of gold in the vault, can be sold or physically delivered at the doorstep for a fee.

II) People are shifting their money away from fixed deposits and toward digital gold as interest rates on fixed deposits fall. Among others, the following are two well-known platforms that provide "e-gold" services to their users/clients:
  • Google Pay - This platform allows its users to purchase pure 24 K gold.
  • Amazon Pay – a company situated in the United States that was founded in 1994. A user can exchange gold through his/her gold vault after installing Amazon App and logging in.

Demerits of Digital Gold/E-gold

Purchasing gold can have various advantages in the right conditions. Digital gold is a modernized method of purchasing gold via online channels. It is a more easy and cost-effective option for people looking to purchase gold. However, digital gold, like any other commodities investment, has pitfalls, such as:
  1. Most people considered digital gold just as a paper certification of gold ownership.
  2. A digital gold currency (DGC) carries risk because it is electronic money provided and maintained by private businesses. Digital currencies are difficult to utilize since they are not widely recognized.
  3. Aside from tax considerations, there is a limit to the amount of gold investment that can be ordered for physical delivery.
  4. When purchasing digital gold, bear in mind that if you are only looking for virtual gold, digital gold is the best option. It is not a wise decision to buy digital gold and then seek physical delivery.
Although gold performs well on occasion, it is not always evident when or how to buy it. Because gold does not produce profitability on its own, determining when it is a smart buy can be difficult. However, with stocks, there are more visible signals based on the company's results. When investors anticipate economic concerns, they frequently retreat to gold, making it a protective investment. You may easily convert certain types of gold-based assets to cash if you buy them.

Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Contents of this article do not constitute investment advice and should not be taken as such.

Labels:

Popular posts from this blog

Cryptocurrency for Amateurs

   Cryptocurrency is a digital or virtual payment system that is protected by cryptography, making it virtually impossible to counterfeit or forge. Anyone, from anywhere, can use digital wallets or exchanges dealing in crypto to send or receive money through a peer-to-peer (P2P) ecosystem. Cryptocurrencies exist on a blockchain, which is a digital public ledger that stores electronic records that are shared and replicated across many locations and maintained on a decentralized network that keeps all cryptocurrency transactions updated. Basics concepts behind crypto (i) Crypto is a digital currency that was established utilizing encryption methods as an alternate form of payment. The adoption of encryption technology implies that cryptocurrency can act as both a currency and a virtual accounting system. It is also believed that crypto was introduced as a substitute for fiat money. Cryptocurrency, unlike fiat money, is not recognized as legal tender by the majority of the worl...
Read more

Online Surveys understanding of Benefits and Pitfalls

Online surveys through the Internet and using smartphones are becoming more popular among Brands and researchers due to benefits such as decreased costs and universal Internet access. In view of strategic publicity by survey companies, people believe it is an easy way to engage in online surveys and earn extra money. You can certainly make a little amount of money if you have more time to invest than the time required for this job. However, any online paid surveys that promise a huge sum of money are most likely bogus. Earning money using online surveys is not as easy as it appears; it takes much more effort and days to earn $10 each week. The purpose of this post is to explain why online surveys are undertaken and how to profit from them. Online surveys are two-thirds quicker than conventional research methods, and they also contribute to the development of tomorrow's products. Free of charge with financial incentives, you can participate in polls while standing in lines or in yo...
Read more

Forex Trading

Forex trading means exchanging the national currencies of different countries. The system of exchanging money can be traced to the old barter system, when governments began trading commodities for precious metals, resulting in the issuing of coins in valuable metals including copper, known as coinage metals. Money is a medium of exchange that is used to complete all of our domestic and international trades and services. Currency, including bank notes, is a modern type of money issued by a government in the form of paper or coins for a specific country, such as the US dollar or the Euro. Forex History at glance: Foreign exchange trading began in Amsterdam and spread throughout the world. The advancement of the Forex market can be summarized as under: Pre-Historic currency markets prior to 1875 Gold & Silver standard (coinage metals) 1875-1939 Pack Systems such as the Bretton Woods system (1971-1973), the Smithsonian Agreement (1971-73), and the Plaza Accord from 1985 to 1987. Pre...
Read more

Basic knowledge of stock trading

A share or stock is a monetary value-based division of a corporation's or company’s entire capital. Share trading involves buying and selling shares of corporations/companies listed in the stock market. The term "stock market" refers to public exchanges in which stockbrokers, traders, buyers, and sellers can trade in thousands of equities of firms listed on the exchange. These companies sell shares of their business, providing the general public the opportunity to invest in them. What are shares and stocks (aka Equities)? A share is capital raised by a firm or corporation through the issuance and subscription of shares in financial markets. Simply put, a share is a unit of equity ownership in a company's or corporation's capital. Share capital refers to all of an enterprise's shares, as well as units of mutual funds, limited partnerships, and investments as a trust in the organization with the intention of sharing profit and loss. A shareholder (or stockholder...
Read more

Intelligent Virtual Assistant and Human Virtual Assistant

  In the modern technology era, virtual assistants can either be software or real human beings. A computer system equipped with artificial intelligence and machine learning techniques capable of intelligently supporting people is referred to as an intelligent virtual assistant. With reference to humans, a Virtual Assistant is someone who works from home and handles administrative tasks for clients. Depending on the size and workload, a Virtual Assistant (VA) can serve as a personal assistant, data visualization expert, executive assistant, administrative assistant, or virtual sales executive. Artificial Intelligence (AI) Virtual Assistant (VA): With all of the new technology being introduced, it is easy to become confused with the terminology bot, chatbot, and virtual assistant. Primarily chatbots and Virtual Assistants are computer programs powered by Artificial Intelligence. However, the characteristics of both these technologies are different. The key difference between a chat...
Read more