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| June 10, 2024

Digital Gold vs. Gold ETFs: What's the Best Investment Option for You?

In India, gold has always held a special place, not just for its cultural significance but also as a trusted store of value. Traditionally, people in India have invested heavily in physical gold, safeguarding their wealth for generations. Today, the gold investment industry has expanded beyond physical gold to include modern options like digital gold and gold ETFs (Exchange-Traded Funds). From being a convenient process to being used as gold loan collateral, these methods offer a number of benefits for investors. As they gain popularity, it becomes essential to compare digital gold vs. gold ETF in terms of what they entail, and the advantages they offer.

Table of Content

  1. What is Digital Gold?
  2. What is a Gold ETF?
  3. Digital Gold vs. Gold ETF
  4. Who Should Invest in Digital Gold?
  5. Who Should Invest in Gold ETF?

What is Digital Gold?

Digital gold is a modern way to invest in gold without the need to physically hold the metal. Instead, investors buy gold online, which is stored in insured vaults on the investors’ behalf. This means you own gold virtually, backed by real physical gold. It is a convenient and cost-effective method, in which you are assured of 24 K gold of 99.99% purity. Unlike physical gold, which requires secure personal storage, Digital gold is stored in high-security vaults managed by the service provider, eliminating the need for personal storage. Further, digital gold can be bought and sold online instantly, providing greater liquidity.

One of the biggest benefits of digital gold is that you can avail a gold loan against it. Once the ownership of your digital gold has been verified, the procedure for a gold loan is quick and easy. All one has to do is apply for the loan through a financial institution like Muthoot Finance that accepts digital gold as collateral. The institution evaluates the value of your digital gold and approves the loan based on its current market value. Once approved, the loan amount is disbursed to your account. The entire process can be managed online, providing ease and comfort.

Suggested Read: How To Buy, Sell Or Invest In Digital Gold?

What is a Gold ETF?

A Gold ETF is a type of exchange-traded fund that aims to track the price of gold. Each unit of a gold ETF represents physical gold held by the fund in a vault. Investors can buy and sell these units on the stock exchange just like any other stock. To invest in gold ETFs, you need a Demat account to hold your units electronically. Just like digital gold, gold ETFs also provide high liquidity and eliminate the need to physically store gold. When you redeem a gold ETF, you do not receive gold but the cash equivalent of the value.

Gold ETFs can also be used as collateral for a gold loan. The procedure is straightforward and simple, wherein you pledge their gold ETF units to the lender who, then, evaluates the current market value of the ETF units. Based on the valuation, the loan amount is disbursed.

Digital Gold vs. Gold ETF

Here's a quick comparison to help you decide between digital gold and gold ETFs:


Digital Gold

Gold ETFs


Stored by the provider in insured vaults.

Represented by units in a Demat account, and managed by a broker.


Can be sold online at any time.

Traded on the stock exchange during market hours.

Minimum Investment

The minimum investment amount is Rs.10/-

Minimum investment is 1 unit which equals 1 gram of gold.


3% GST on transactions

Includes expenses such as opening a Demat account, transaction charges on sale and purchase etc.


Not Regulated.

Regulated by SEBI.

Who Should Invest in Digital Gold?

Since investing in digital gold can start as low as Rs. 10/-, it is ideal for those who want to invest in gold in small amounts and want to avoid hefty storage or investment charges. It also offers high liquidity and ease of online transactions so those looking for short-term investments usually opt for digital gold. Lastly, as an investor, you also have the option of redeeming your investment for actual gold bars or coins.

Who Should Invest in Gold ETF?

Gold ETFs are ideal for investors who are already familiar with stock market operations, and are looking to hold gold as part of a diversified portfolio. Those who want to minimize storage and insurance costs associated with physical gold may also opt for gold ETFs.

Whether you choose digital gold or gold ETF, you can reap the benefits of a gold loan in both investment types. Muthoot Finance, India’s leading NBFC, offers a hassle-free gold loan experience. Our streamlined gold loan procedure along with competitive interest rates, and flexible repayment options, allow you to leverage the value of your digital gold holdings to meet your financial needs.

Get in touch with us today to explore our gold loan solutions and discover how Muthoot Finance can help you unlock the value of your gold.

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