Digital gold currencies represent electronic and private currencies supported by gold bullion. Sometime, it is also called E-Gold. Just like gold bars or gold certificates, it is protected against inflation. However, digital gold is safer and easier to store. This commodity may be bought in unlimited amount compared to ingots or coins which are sold in fixed amounts.
Nonetheless, it is not a practical form of exchange. For digital accounts, balances and transactions are denominated according to weight. Concerns regarding government regulations and taxes have not been resolved as well. Governments have yet to find out how to manage transactions using the gold-supported digital currency. At the same time, computation of potential capital gains in terms of US dollars has not been determined by regulators.
Guidelines, Advantages and Disadvantages
Regardless of the issues at hand, this is considered a remarkable method of investing in the precious metal. With digital currencies, you can invest from practically any country in the globe. All you need is a computer and laptop with stable Internet connection. Storage fees and spreads are relatively low. There are no management fees compared to exchange-traded or mutual funds.
Investments are quite small. The lowest unit generally amounts to one gram of gold. It can also be swapped for the precious metal or its equivalent in other currencies. However, there are risks to be considered. The issuer might not be handled well which can result to insolvency. Companies that issue digital currencies are not banks so these are not subject to regulatory measures. Although a Global Digital Currency Association was created in 2002 to watch over activities of these firms, it is a non-profit association which lacks authority and clout.
You also have to look at the possibility of data security hazards. These currencies are mere digital records. Therefore, crooks can easily hack the computer systems with minimal degree of security. Furthermore, issuers do not employ audit companies or reveal the amount of gold that they possess.
Right now, gold experts say there are two reputable providers in the market. These are Gold Money and Bullion Vault. The two companies supply allotted gold that investors can buy and sell immediately similar to foreign currencies.