E-gold is held electronically in the demat form and can be freely converted into physical gold. In India, e-gold is offered by the National Spot Exchange Limited (NSEL), which gives investors the option to invest in commodities such as gold, silver and platinum online.

Any investor can buy gold in small quantities on the NSEL and sell it after making a profit. He also has the option of taking physical delivery of the metal.

Another way of taking exposure to gold is gold ETFs, financial instruments that track the price of gold. Gold ETFs are the same as mutual fund units where each unit is equivalent to one gram gold, though some funds give the option to invest in lower denominations of 0.5 gram as well.

Gold ETFs can be bought and sold like mutual fund units through the demat account via a depository.

While a few ETFs give the option of taking physical delivery and some don't, investors in e-gold can take delivery anytime they want.

Conversion of gold ETFs into physical gold is possible only after it exceeds a certain size. This can vary from 500gm to 1kg depending upon the fund house.

In gold ETFs, investors track NAVs, which keep changing with gold prices. In e-gold, investors directly track the price of gold.