The Difference between Physical Vs Digital Gold Investment

Introduction

Welcome new and existing readers to our blog. Today, we will discuss the difference between "Physical Gold" & "Digital Gold" investment. We hope this article helps you understand the differences between both investments and aids in your decision-making process on which is more suitable.

What does it mean to invest in Gold?

We believe it is vital to discover your investment goals. Each investor has a different set of goals that they would like to achieve. Some investors may prefer short-term investment to mitigate currency fluctuations or inflation risks, while others prefer longer-term. Discovering your investment requirements will help tremendously in deciding on what type of gold investment should one pursue.

Physical Gold Investment

There are several types of physical gold investment that an investor can pursue. The most common types of physical gold investment come in the form of bars, coins, wafers or jewellery. Once you have understood your goals and requirements, it comes down to several things: -

a) "Premium": - The additional cost on top of the Gold spot price influenced by market demand & supply, manufacturing cost and logistics.

b) Investment Size: - How much are you planning on investing. Generally, we adopt the approach that investors with stable income should support at least 8% of their net worth into Gold. Investors with inconsistent income can invest within 3% to 4% of their net worth.

c) Available Products: - As mentioned earlier, there are various physical gold forms that one can invest in. We have segregated the products into two forms: -

i) Minted Bars: - These types of bars, as indicated below, are the ones with design on the front side of the bar. They usually command a higher premium as the manufacturing of these bars require precision to produce and maintain consistency.

ii) Cast Bars: - Cast bars are more on the traditional side of gold investment. These types of bars are usually for the investor that is strictly interested in the investment of Gold. These bars are hallmarked with the manufacturer's brand rather than a unique design.

iii) Gold Coins: - Gold coins have an addition to the premium in terms of rarity. Some gold coins are more expensive as they become scarce, which can value add to the value of the Gold.

If you are keen on learning more about the difference between these types of physical gold bars, you can check out our previous article.

Digital Gold Investment

Our brand E-Aurum 79 is an example of a digital gold investment that offers direct ownership of physical Gold without delivery and fabrication fees associated with bars or coins. The Gold that you purchase under E-Aurum 79 is kept in a fully secured and insured vault.

How does it work?

When you purchase AME Digital Gold, an equivalent amount of physical Gold is stored in our secured vaults on your behalf. Storage in our vaults resolves the trouble of physical Gold ownership, which is necessary to keep it safe.

Is digital Gold a good investment?

Yes, Digital Gold is a good investment option. Clients can mitigate the disadvantages of physical gold ownership, such as theft, secure storage, and liquidation.

Digital Gold serves to provide a diversification of one's investment portfolio. Gold has historically been an advantageous asset to combat economic uncertainty, inflation and to create wealth over a long-term period.

What are the Pros & Cons of Physical Gold Vs Digital Gold?

A) Pros of Physical Gold

Look & Feel: - Investors will be able to see and feel the Gold physically. Our past experiences have indicated that a large majority of investors prefer to buy physical Gold for this reason.
High Liquidity: - Physical golds are highly liquid due to their demand being sorted after. Many parties are willing to take the other side of the trade as Gold has many uses. Established gold bar brands such as PAMP, Perth Mint, Metalor, and others are even more accessible to liquidate due to their global recognition.

B) Cons of Physical Gold

Theft: - Possession of physical has some element of robbery for the investor. Investors will have to find a secure facility to store their physical Gold.
Zero-interest & Dividend: - Gold does not yield interest or dividends similar to a stock's performance. Capital gains for gold investment come strictly from the gold price.

A) Pros of Digital Gold

Authentication: - Digital gold investments makes it easy for you to authenticate your Gold. A third party regularly audits the Gold that is stored in the vaults by E-Aurum 79. Investors do not need to search for a way to verify the authenticity of their Gold when owning digital Gold.
Cost of Ownership: - The price an investor pays for digital Gold is much lower than physical gold ownership. The "Premium" paid is lesser because there is no need for manufacturing and delivery.
Liquidity: - Even though physical Gold is highly liquid, investors will still have to search for a party willing to take the Gold of their hands. Digital Gold means that investors do not need to search for a buyer, E-Aurum 79 is the buyer of Gold for you.
Storage: - Digital Gold mitigates the risk of theft and the requirement to secure Gold in a safe location. E-Aurum 79 provides storage facilities for all digital gold purchases made. Any gold that you buy is physically kept in a secured and insured vault. If we were to analyse the costs of renting a safety deposit box at a bank versus the cost of our storage facilities, it would be a no brainer to store your Gold with us. Rentals for safety deposit boxes range from RM 800 to RM 2,500 per month compared to our small fee of 2%.