Digital Gold vs Gold ETF: Which is Better? Key Differences

In early 2025, the investment demand for gold ETFs increased by 170% year-on-year, whereas demand for gold jewellery fell by 25% in volume. This shows how Indians are opting for smarter gold investment options such as digital gold and gold ETFs instead of buying physical gold.

With the help of digital gold, you can buy small fractions of gold online with the option of home delivery. On the other hand, gold ETFs (Exchange-traded Funds) are SEBI (Security Exchange Board of India) regulated and provide transparency and liquidity by investing in physical gold or gold derivatives. We will understand the difference in detail in this blog. Read on!

What is Digital Gold?

You can purchase, sell, and accumulate gold in small quantities using digital gold, an online investing option, without having to worry about security or storage. To ensure safety and transparency, the gold you buy is backed by physical reserves held in secure vaults.

Investors can be assured of the best possible quality, as it is available in 24K with 99.99% purity. Accessibility is one of its greatest benefits of digital gold as you may begin investing with as low as ₹1 and gradually increase your holdings.

This product is offered by several apps, fintech platforms, jewellers, etc., where the physical gold equivalent to your investment is stored securely by the provider on your behalf. Examples of platforms offering this service are PhonePe, Paytm, Amazon Pay, Groww, Tanishq Digital Gold, etc.

Additionally, digital gold provides the option to turn your investment into actual coins or bars, which makes it appropriate for both personal consumption and long-term wealth accumulation.

What is a Gold ETF?

A gold ETF (Exchange-traded Fund) is a SEBI-regulated investment fund that tracks the price of physical gold. When you buy any number of units of a gold ETF, it represents a certain quantity of gold, which is backed by actual gold stored in secure vaults.

Without having to purchase, hold, or store physical gold, investors can have exposure to existing gold prices through gold exchange-traded funds (ETFs), which are traded on stock exchanges like other stocks.

One can minimally invest in 1 unit of gold ETF in India, which is equivalent to 1 gram of gold with a minimum purity of 99.5%. All of the gold ETFs listed on Indian stock exchanges, such as the NSE and BSE, follow this standard denomination.

Digital Gold vs Gold ETF: Key Differences

Now that we know what digital gold and gold ETFs are, let’s understand the key differences between them to opt for the best investment option:

Digital Gold vs Gold ETF: Which is Better?

Both digital gold and gold ETFs offer an excellent opportunity to invest in gold without the need to store physical jewellery. However, to decide which option is best, you need to assess your investment goals and current financial situation:

1. If you are a small investor seeking flexibility, you should opt for digital gold. You can easily buy in very small amounts, sell it during an emergency or other financial need through apps, and build a portfolio of 24K, 99.99% pure gold stored securely in insured vaults. It's simple and cost-effective for consistent accumulation.
2. Investors who wish to trade gold-like stocks on exchanges like the NSE or BSE, which are SEBI-regulated and already have a demat account, should consider gold exchange-traded funds (ETFs). They are inexpensive (no making charges), backed by 99.5% pure gold, and extremely liquid during market hours.

Therefore, opt for digital gold for small, flexible, and quick investment, and choose gold ETFs if you want to trade gold like stocks with potentially lower costs.

To Conclude

Both digital gold and gold ETFs are excellent options for investing in gold without holding physical jewellery. Gold ETFs are best suited for investors who prefer trading gold like stocks through a demat account with minimal charges. Digital gold, on the other hand, is suitable for investors looking for flexibility and small, convenient investments with the option to convert them into physical gold whenever needed.

Looking for quick funds against your gold? Connect with Poonawalla Fincorp to obtain a Gold Loan with quick approval and minimal documentation. Explore more on the official website!

Frequently Asked Questions

Is it possible to convert digital gold into physical gold for a Gold Loan?

Yes, there are several digital gold providers allowing investors to convert their digital gold holdings into physical gold. After conversion, you can use the physical gold as collateral and obtain a Gold Loan at affordable rates.

Does utilising gold investments as collateral for a Gold Loan carry any risks?

Yes, a Gold Loan can only be obtained for physical gold. It is not possible to directly pledge digital gold or gold ETF units. If gold is turned into physical form, make sure it is stored securely, and that the appropriate documents are in place to prevent difficulties with loan approval.

What are the taxation rules for digital gold and gold ETFs?

Both digital gold and gold ETFs have similar taxation rules. If sold within three years, short-term capital gains are taxed in accordance with your income slab; if held for more than three years, long-term capital gains are taxed at 12.5% without indexation.

Which option should I choose for long-term wealth building: digital gold or gold ETFs?

Given their cost-effectiveness, high liquidity, and regulatory status, gold exchange-traded funds (ETFs) may prove a better choice for long-term investors. Since digital gold may be readily converted into coins or jewellery at a later time, it is better suited for short-term savings or goals related to jewellery.

Do gold ETFs track international or domestic gold prices?

Gold ETFs in India primarily track domestic gold prices, which are influenced by both global gold rates and the Indian rupee’s exchange rate against the US dollar