What Is Digital Gold? Advantages of Digital vs. Physical Investments

Gold has always been in demand as a safe haven during periods of economic uncertainty, and it’s a particularly hot investment right now. As the stock market has faltered, the value of gold has hit new highs.

However, not everyone has enough money to buy an ounce of gold—valued at $3,350 as I’m writing this in mid-April 2025—and not everyone wants to store physical gold. In that case, digital gold may be a good investment option.

What is digital gold? It’s a way of buying a share of physical gold that’s stored in a vault. Keep reading to learn more about this 21st-century investment strategy.

Table of Contents

1. How digital gold works
2. Gold-backed cryptocurrencies
3. Pros and cons of digital gold
4. Digital gold vs. physical gold
5. How to invest in digital gold
6. Tax implications of digital gold

How digital gold works

When people discuss digital gold, they sometimes use the term to refer to investments, such as gold exchange-traded funds (ETFs) or gold futures. But in this guide, we’re talking about an investment that comes with real ownership of physical gold.

Here’s how digital gold typically works:

• A digital gold provider purchases large bars of gold, which are stored in a secure location.
• Investors purchase fractional shares of that gold.
• When investors want to liquidate their shares, they may be able to redeem them for physical gold or cash, depending on the provider used.

In this way, investors can diversify their portfolio and benefit from a gold investment without handling physical gold themselves. Some providers also offer free or reduced-cost storage.

You can purchase digital gold through specialized online platforms and apps—more about those below.

Gold-backed cryptocurrencies

Gold-backed cryptocurrencies are also sometimes referred to as digital gold.

Unlike the digital gold outlined above, you won’t own a share in physical gold if you buy one of these cryptocurrencies. Instead, you get a blockchain token that has a value backed by gold. That said, some gold-backed cryptocurrencies will allow owners to redeem their tokens for physical gold.

Examples of gold-backed cryptocurrencies include:

• Tether Gold (XAUt)
• Paxos Gold (PAXG)
• Perth Mint Gold Token (PMGT)

You can purchase gold-backed cryptocurrencies on crypto exchanges such as Coinbase.

Pros and cons of investing in digital gold

As with any investment, buying digital gold has pros and cons. Be sure you understand these before making a purchase.

Pros

• Fractional ownership

  With digital gold and gold-backed cryptocurrencies, you don’t need to worry about high minimum investment requirements. Investors can purchase fractional shares or tokens at a low cost.

• 24/7 transactions

  Digital gold and gold-backed cryptocurrencies can be purchased at any time and on any day, including weekends and holidays.

• Diversified portfolio

  Like physical gold, digital gold is an option to diversify your portfolio with precious metals.

• Hassle-free gold investment

  Don’t worry about finding secure storage for your gold or paying to insure it. Digital gold providers take care of that.

• Cash or physical gold liquidation options

  Although it can vary by platform, you can often liquidate digital gold for cash or physical gold that’s shipped to you.

Cons

• Little to no oversight

  Because it’s a new investment option, there are few, if any, consumer protections for purchasers of digital gold.

• Few providers

  Unlike gold IRAs, relatively few companies offer digital gold right now.

• Conversion charges

  You might pay a fee to convert your digital gold into physical gold. Also, check for storage fees, which some providers charge for digital purchases.

• Counterparty risk

  One of the biggest risks associated with digital gold is the fact that you’re relying on a third party to properly store and protect your investment. It’s also possible that the terms of service for a third party could change.

• Limited gold options

  Those liquidating their investment for physical gold may find they have few options when it comes to how they receive that gold. For instance, only certain rounds or bars may be available.  

Digital gold vs. physical gold

If you’re debating between digital gold and physical gold, here’s how the two stack up.

	Digital gold	Physical gold
Storage and security	The platform you use to invest secures and insures the digital gold	The investor is responsible for storing gold securely
Investment minimums	Low or none	$10,000 minimum is typical for delivery purchases
Liquidity	The digital gold platform will facilitate liquidation; cash and physical gold options may be available	The investor must find a buyer to liquidate physical gold
Cost and fees	Vary by platform and may include a premium on purchases, storage fees, and conversion fees if redeeming for physical gold	Markup on purchase; Cost of storage

Digital gold can be ideal for those with limited capital who are looking for a convenient way to invest in gold. Physical gold may be a better option for those with more money to invest and who have a secure place to keep precious metals.

In my experience, digital gold is often a better option because most investors view gold as a short- to medium-term trade during market turbulence or inflation. It’s easier and cheaper to buy and sell. However, if someone sees gold as a long-term holding for decades, physical gold may be better, provided they’re comfortable with the challenges of storage and liquidation.

How to invest in digital gold

Digital gold is a relatively new concept, and only a few services specialize in it. Two of the biggest players in the marketplace are:

• OneGold from Apmex and Sprott in the U.S.
• DigiGold from The Royal Mint in the U.K.

Globally, this investment option seems to be most popular in India, where multiple platforms have sprung up to offer digital gold. These include the following Indian apps and websites.

• Jar
• SafeGold
• PhonePe
• CaratLane eGold

If you’re interested in gold-backed cryptocurrencies, you can make purchases on Coinbase and other crypto marketplaces.

To invest in digital gold, follow these steps:

1. Choose a platform: Before buying digital gold, check where the platform is located, how it stores the gold, and the amount of insurance it holds. Also, consider how you can liquidate your digital gold, and be sure to read reviews to see if they raise any red flags. If you want to open an IRA, some providers, such as Bitcoin IRA, offer gold-backed cryptocurrencies.
2. Set up an account: Creating an account is typically fast and free, and only minimal personal information is required.
3. Make a purchase: Within the platform, you can browse purchasing options and buy digital gold or gold-backed cryptocurrency. Some platforms may charge a service fee for credit card payments.
4. Manage your investment: Most platforms have a user dashboard that makes it easy to see your account balance, value of gold holdings, and other investment information. If and when you want to liquidate your digital gold, you may be able to initiate this transaction from your online account.

Tax implications of digital gold

Digital gold is a newer investment option, and the industry is almost unregulated. Gold-backed cryptocurrencies also have limited government oversight. Still, they are subject to taxes. If you sell your digital gold or gold-backed cryptocurrency for a profit, it’s subject to capital gains tax.

Cryptocurrencies—including those backed by gold—may be held in a self-directed IRA. These accounts come with benefits such as a tax deduction for contributions with a traditional IRA or tax-free withdrawals in retirement for a Roth IRA. 

Platforms like iTrustCapital make it easy to invest in gold, precious metals, and cryptocurrencies all within the same self-directed IRA. As always, it’s smart to consult with a finance or tax professional about the ins and outs of an investment before making a purchase.