Gold has retained its value over thousands of years, and now modern technology steps in to make it more accessible. Fintech has only made it easier to purchase, trade, invest and spend gold as a digital commodity.
It’s a common assumption that gold can only be handled as a tangible asset, but digital gold is becoming a popular contemporary option for young investors, addressing many of the limitations that are attached to physical gold ownership.
Digital gold comes with less risk and it’s easy to use. Physical gold can have impurity issues, making it difficult for novices to know good gold from bad. On top of the hefty storage and insurance fees, it can also have expensive “making charges”, which is the cost of producing or designing gold into jewellery, coins or ornaments.
On the other hand, digital gold vendors and gold-backed platforms typically operate under quality assurance regulatory bodies, guaranteeing the purity and quality of the digital gold they provide.
The introduction of digital gold through fintech has made it easier for a wider and more diverse audience to leverage gold as an asset as we continue to transition more of our finances to fintech platforms and applications.
What you need to know about digital gold before investing
Younger generations are diversifying and revolutionising investment, which is rapidly accelerating with the ease of access to fintech. Digital gold investments is one of those exchanges rising in popularity. Digital gold allows you to invest in its equivalent in pure gold through online channels while it’s secured in vaults. All you need is your device to access it, making it more efficient to handle your assets and make quick transactions if needed.
Physical gold can offer security because it’s something you can hold onto, but it can be unwieldy in that it’s more about decoration than wealth as well as being risky to move and sell on in the future. You will also need to find reputable third-party storage firms or use highly secure safety depository boxes to store physical gold, which can include additional expenses due to handling and storage fees. Checking the purity of physical gold will also take up resources, especially if the purchased gold doesn’t have good quality.
Digital gold addresses these limitations by providing secure online channels where you can store your precious metal assets and conduct transactions. Doing your due diligence about potential service providers will help you find the right partner for your investments and avoid fraudulent online vendors.
Here are things you should check before deciding where to invest digital gold:
- Service provider – Research your potential provider’s industry expertise and professional experience. They need to be a reputable provider with solid partners and parent companies that are genuine and reliable.
- Vaulting location – Some gold-backed fintech platforms may store your gold in overseas locations, which can impact the pricing of gold compared to domestic locations. Check whether providers offer global networks of vaults, which can allow you to store and receive physical gold from multiple locations around the world.
- Sourcing of gold – Make sure the gold you purchase comes from legal sources. There are a number of illegal mining groups and groups affiliated with unlawful military operations.
- Market intermediaries – This is a good way to check the legitimacy of your potential service providers. Market intermediaries, such as payment wallets, are regulated third-party products that do their own due diligence before endorsing a provider to a customer.
- Pricing – The quality and purity of gold determine the pricing, so it’s important to know how much you want to allocate for your precious metal assets. Fintech platforms that offer fully integrated services might have higher pricing fees, but they will allow you to easily invest, trade or even gift gold.
How do you use gold in fintech?
In order to make the most of the technological advancements, you’ll need a solid understanding of just what fintech is and how it can help you in your finances. Fintech can support you in automating your finances while ensuring that your investments are aligned with your goals.
Fintech has also helped investors utilise precious metals with ease and convenience, and it has influenced the rise of digital gold and other “tokenised” assets.
The tokenisation of precious metals and fiat currencies began in blockchains, which is one of the core technologies in fintech and is commonly used for secure cryptocurrency transactions. Even though blockchain was rising in popularity, cryptocurrencies had high volatility. To counteract the speculation around these digital currencies, stablecoin was developed to offer price stability and give each token in circulation a set amount. This enabled users to “tokenise” both fiat currencies and precious metals, including gold.
For a nominal fee, you can store tokenised gold in mobile wallets and trade it to people around the world as long as you have a stable internet connection.
Digital gold, such as tokens, offers improved functionality and mobility to traders and investors who want an alternative option to physical gold holdings.
3 benefits of utilising gold in fintech platforms and applications
Digital gold offers increased functionality and ease of use, and these features are further amplified when you use digital gold through fintech.
Here are three key benefits of utilising your holdings in fintech platforms.
1. Highly liquid and convenient
Digital gold can be easily bought or sold through virtual platforms. The process is quick compared to physical gold transactions, where the product has to go through third-party sellers such as jewellers, precious metal dealers or government mints.
With just a few taps on your device, you have access to your digital gold stores so there’s no need to transport bars for trade or holdings. It’s also easy to convert purchased digital gold into cash as the money can be sent directly to your account.
2. Digital gold is real and always has a high-purity level
Digital gold reduces the risk of impure and fake gold purchases. The gold purity level from reputable vendors is always high, it can be 99.5% and above. It’s important to have a checklist of research items about potential service providers before you decide where to invest in digital gold. This will ensure that you find the right vendor and that you can get high returns on your investment. Reputable service providers will typically have insured vaults for gold, ensuring that your holdings have a secure storage location as soon as you purchase your digital gold.
3. It’s a “safe haven” asset
Societal and historical impressions of this precious metal make it incredibly valuable. The scarcity of physical gold ensures that it retains its worth, while still being available enough to produce and circulate in the market.
Gold is a “safe haven asset” because you can be confident that it will retain its value even during times of disruption and turbulence. The development of digital gold has created a highly adaptable investment resource in the fintech landscape, making your assets more accessible during unexpected financial situations and challenges.
Fintech has made it possible to own gold without experiencing any of the limitations that typically come with it. Investing in digital gold with fintech applications can help you further diversify your investment portfolio while enjoying the convenience of doing your transactions online.
Are you eager to discover more about how to use a gold-backed fintech platform? Listen to our podcast episode to learn how partnering with Nauggets can help you utilise digital gold.