We’ve said it before: finance has evolved, giving rise to new ways of owning gold. Now traditional physical gold investing has a new contender in digital gold – a virtual asset that operates essentially the same way. Most platforms, like ours, back each token with real gold, store the gold for free, and offer any holder to collect their gold from the vault its held in.

Through digital gold, investors can have the best of both worlds – invest in one of the most reliable and stable assets available, and benefit from the utter convenience of the digital world.

Let’s delve into the pros and cons of both digital and physical gold, so you can make an informed choice about these two popular assets.

What is Digital Gold?

Digital gold is digitized ownership of real-world gold. These can be represented by tokens and are accessible anytime through a digital wallet. Digital gold represents ownership of actual gold but is stored online, accessible anytime.

The official term for the digitization of assets is RWAs, or Real-World Assets. RWAs are assets found in the real world – like real estate, cash, intellectual property, and commodities like gold – that have been digitized or tokenized and placed on the blockchain.

Unlike traditional gold purchases, digital gold doesn’t require the buyer to coordinate with secure vaults or deal with transportation. The issuer would typically handle all of this, which improves customer experience and opens the market to a broader audience seeking flexibility and cost-effective gold investment.

The Pros of Investing With Digital Gold

1. Ease of Access and Instant Transactions Digital gold is exceptionally accessible, with platforms like DAU allowing investors to trade and store DAU tokens without the hassle of physical logistics. Transactions can be completed within minutes, freeing up the buyer’s time and likely reducing stress.

2. Lower Storage Costs Storing physical gold requires top-class security measures, which adds to the overall costs. Conversely, most digital gold issuers provide the storage at no added cost. This is because gold-backed tokens, by definition, are backed by real gold, meaning the issuers must have a solution for storing the gold and should provide it competitively priced within the market. This all translates into lower costs for the investor compared to physical gold.

3. Fractional Ownership and High Liquidity One of the strongest appeals of digital gold is the ability to buy fractional amounts of gold, making investing more accessible to all levels of investors. Digital gold investments offer high liquidity, allowing for instant and worry-free trading, removing the need to find a buyer looking for that exact amount.

4. Security and Transparency Platforms selling digital tokens use blockchain technology, meaning every token transaction is transparent and secure. Whatever platform an investor uses to purchase digital gold, it is important to research them and see if they follow strict AML (Anti-Money Laundering) and KYC (Know Your Customer) protocols. This would ensure the integrity of each trade while giving investors confidence in the legitimacy of their digital gold holdings.

Potential Drawbacks of Digital Gold

1. Reliance on Technology Since digital gold relies on platforms and the internet, any outages could temporarily impact accessibility. This dependency can be a disadvantage for those who are uncomfortable with digital reliance.

2. Market Risk At the end of the day, digital gold is still gold. It is important to keep in mind the inherent risk in investing in anything. The market could turn for the worse, reducing the value of the digital asset held. This risk is applicable to physical gold as well, but still worth mentioning.

3. Regulatory Risk The regulatory framework differs from country to country. If the token is issued in a country where the regulations are not clear and acceptable, that would prove riskier for the investment. Places like Switzerland and Dubai have strong gold regulations in place protecting the investor/buyer.

4. Issuer Risk Ensuring the issuer is legitimate and has the gold secured to back the tokens is the biggest risk. It requires research on the investor’s side to ensure these businesses are licensed, audited, regulated, transparent, etc. otherwise the risk of losing the investment greatly increases.

What is Physical Gold?

Owning physical gold means owning tangible forms of gold such as coins, bars, and jewelry. Some investors and buyers prefer physical gold because it removes any and all doubt as to who possesses the gold.

Gold, compared to other non-digital assets, is also fairly liquid – a seller could find a buyer at most times with little difficulty. Not to mention it carries the historic value and sentiments cultivated over millennia.

Key Advantages of Physical Gold

1. Tangible Ownership As mentioned above, owning physical gold provides an unbeatable sense of control that digital forms don’t. Physically holding an asset puts those who prefer the reliability of something they can physically possess at ease.

2. Cultural and Historical Significance In some cultures, physical gold holds sentimental value. Not only is it passed through generations as a store of wealth, but it is also used in rituals, gifts, jewelry, talismans to ward off evil, etc. Gold is treasured for its cultural importance and aesthetic appeal, making it, to some, more than just an investment.

3. Universal Recognition and Stability Physical gold is universally recognized and respected as a valuable asset. In times of financial instability, gold’s historical performance as a store of value makes it a reliable choice for investors seeking stability.

Drawbacks of Physical Gold

1. Secure Storage and Insurance It would be difficult to hide physical gold under the mattress – not to mention uncomfortable – so there would have to be a cost to place them in highly secured vaults or safes. This would include logistical transportation, vault costs and, depending on the amount of gold held, the holder may want to add insurance on the gold in case they are stolen, which is another added cost and inconvenience.

2. Selling Risks Selling gold can be a more involved process compared to digital gold. It requires transportation, potential appraisal, insurance, and most importantly, a trusted buyer. The type of gold sold could affect the price the gold is sold at as well, meaning the seller could be leaving money on the table.

3. Price Variability Physical gold prices may vary based on location and market demand. Digital gold tokens like DAU token prices in line with global rates, providing consistency across regions.

Which is the Right Choice?

There is no one right answer. It all depends on the investment goals, preferred method of ownership, logistical tolerance levels, etc. When considering purchasing gold, the blessing and curse of it is the form in which the buyer chooses the gold – digital, jewelry, bars, coins, ETFs – and there could be a multitude of reasons to pick one over the other. But we are not here to convince anyone to do anything, nor to give strict financial advice. We only seek to educate interested individuals more about the differences between physical and digital gold. Many of our other articles add to this, should anyone be interested.

Having said that, our bias as DAU, of course, is digital because of its simplicity to use, the convenience of having it accessible wherever, the security it offers with authorization requirements to access, and more. There is also the cost-saving aspect that is inherent in digital, especially when it comes to storing and transporting – most platforms would not charge for storing the gold and would only charge a small fee for transporting.

Meanwhile, physical gold has been the historical means of storing wealth, passing on inheritance, claiming a social status, and a counterbalance to economic downward pressures. It is also deeply embedded in many cultures and holds symbolic meaning in many ideologies. Physical gold can hold more sentimental value to some over its worth in fiat. This in itself might be reason enough to buy or keep physical gold.

While there are no right answers, it falls onto the buyer to decide what it is they want to get out of the purchase. Ultimately, whichever path someone chooses – digital or physical – it can never be understated that owning gold is a safe decision that, in most circumstances, will prove beneficial to the buyer.