A Comprehensive Analysis – Physical vs Digital

Gold/Silver has long been regarded as one of the most reliable and culturally significant forms of investment in India. Traditionally purchased in its physical form—whether as jewellery, coins, or bars—gold/silver has symbolized wealth, security, and prosperity. With the advent of digital platforms, however, investors now have access to a modern alternative: digital gold/silver. This article provides a detailed comparison between physical and digital gold, explains regional price variations, clarifies purity standards, and highlights the broader economic role of gold in India.

1. Investment Size

• Physical Form: Requires a minimum purchase of at least one gram, the value of which fluctuates daily. This threshold may deter smaller investors.
• Digital Form: Allows investment from as little as ₹1, making it a highly inclusive asset class, particularly for individuals with limited disposable income.

2. Storage and Security

• Physical Gold/Silver: Traditionally stored at home or in bank lockers. Home storage exposes investors to theft risks, while bank lockers involve recurring costs such as annual fees and service charges.
• Digital Gold/Silver: Eliminates storage concerns entirely. Units of digital gold are backed by equivalent physical reserves, securely stored and insured by authorized vaulting partners.

3. Liquidity

• Physical Gold/Silver: Although inherently liquid, resale often requires the original purchase bill and, in many cases, must be transacted through the original dealer to secure fair value.
• Digital Gold/Silver: Highly liquid and tradable at any time and from any location. Transactions are seamless, eliminating reliance on dealers or documentation.

4. Trading Convenience

• Physical Gold/Silver: Requires physical visits to jewellers or banks, which can be time-intensive.
• Digital Gold/Silver: Facilitates instant transactions online. Sale proceeds are credited directly to the investor’s bank account or wallet within a short timeframe.

5. Cost Transparency

• Physical (Jewellery): Buyers incur additional costs such as making charges (typically 7–25%), GST, and premiums for embedded stones or gems.
• Digital Gold/Silver: Represents pure 24K gold. Every rupee invested corresponds directly to the value of gold, with only a 3% GST levied at the time of purchase.

6. Safety and Trust

• Physical Gold/Silver: Carries inherent risks of theft and long-term storage costs.
• Digital Gold/Silver: Fully secured, as each unit purchased is backed by physical reserves stored under regulated and insured conditions.

Why Do Gold Prices Differ Across Indian Cities?

Gold prices are not uniform across India due to the following factors:

• State Taxes: Different states impose varying tax rates.
• Market Demand: High-demand regions such as Mumbai often benefit from lower prices due to higher transaction volumes.
• Transportation Costs: Port cities (e.g., Chennai) experience lower prices compared to inland locations (e.g., Delhi).
• Local Associations: City-specific gold associations play a role in determining regional price benchmarks.

Factors Driving Gold Prices in India

Gold price fluctuations are influenced by:

• Demand and Supply: Limited supply combined with rising demand increases prices.
• Global Market Trends: International movements directly affect local rates.
• US Dollar Value: A weaker dollar boosts gold demand and prices.
• Market Performance: Prices rise during periods of stock market stress.
• Government Duties: Increases in taxes and import duties raise overall costs.

Conclusion

Both physical gold and digital gold retain their significance as investment avenues. Physical gold continues to hold cultural and ornamental value, while digital gold offers unmatched convenience, affordability, and security. As India continues to balance tradition with innovation, both forms of gold will play a vital role in preserving wealth and contributing to the nation’s economic framework.

Purity of Gold: Understanding Different Karats

Gold purity is measured in karats (K). The higher the karat value, the purer the gold. Before exploring the distinctions between 24K, 22K, and 18K gold, it is important to understand that karat is the standard unit used to denote the proportion of gold in a given item.

24K Gold

24K gold is considered pure gold (99.9% purity). All 24 parts of the metal consist of gold without significant traces of other elements. It has a bright, natural yellow colour and is the highest form of purity available.

• It is more expensive than 22K or 18K gold.
• Due to its softness and malleability, it is not suitable for making regular jewellery.
• Commonly used for coins, bars, electronics, and medical devices.
• For example, gold tympanostomy tubes are sometimes used in children with ear infections to improve middle ear ventilation.
• Government Duties: Increases in taxes and import duties raise overall costs.

Note: Gold cannot be purer than 24K. Be cautious if offered 25K or 26K gold, as such claims are misleading.

22K Gold

22K gold consists of 91.67% pure gold mixed with 8.33% of other metals such as silver, zinc, or nickel.

• This mixture makes the gold harder and more durable.
• Commonly used for plain jewellery in India.
• However, it is not ideal for diamond-studded or heavy stone jewellery, as the softer base makes it less supportive of intricate settings.

22K gold is often referred to as 916 gold because 91.6 grams of pure gold are present in every 100 grams of alloy. It is also BIS hallmarked, ensuring authenticity and purity.

18K Gold

18K gold contains 75% pure gold and 25% other metals such as copper or silver.

• Preferred for diamond-studded and gemstone jewellery, as the alloy offers greater strength.
• More affordable compared to 22K and 24K gold.
• The colour is slightly duller compared to higher karat gold.
• It is usually stamped as 18K, 18Kt, 18k, or 750 (indicating 75% gold).



Karat Comparison Table

Karat	Purity	Common Use	Durability	Highest	Stamp/Marking
24K	99.9%	Coins, bars, electronics, medical use	Very soft	Highest	24K, 999
22K	91.67%	Plain jewellery	Durable	High	22K, 916
18K	75%	Studded jewellery	Very durable	Moderate	18K, 750

Taxes on Gold in India Gold can be purchased in various forms—jewellery, coins, bars, or digital gold. The taxation depends on how long the asset is held before being sold.