Digital Gold trading is a company that has gold bullion reserved and sells you certificates, typically online, for a set amount like other investments. There’s some important things to know about this, because there have been several failed companies where investors lost millions doing this. Your risk is going to depend a lot on the level of transparency and accountability of the company you invest in.

Originally the first of these types of companies, INTGold, Standard Reserve, and OS-Gold all went out of business when management diverted the actual gold reserves for other purposes. Then there was nothing of these assets left to back up the investors and many lost everything. The companies in this are self refulated, there’s no FDIC insurance on these investments, your money is only as good as the company you invest in.

Typically they accept payment from secured funds only (no credit cards or anything that can be reversed) and this makes sense to head off fraudulent purchases, or people trying to get their money back if gold goes down in value.

Most of these companies don’t have 100 percent of investments backed with real gold, and some have none at all. Their annual fees range from nothing up to 1 percent or several grams of gold per year.

This isn’t as risky as things like the DXGold virtual currency exchanges, which are different. Several months ago we spoke with one person who used a DXGold system, called about our negative review of it, mentioning he made over $90,000 in several months with it and I we were all wrong about them. He called just recently to see what we were doing, and said he was unable to get his investment or the $90,000 out of the system, they simply wouldn’t allow him to withdraw the money. The track record is online gold certificate trading is mixed, but not as notorious as the virtual currency systems. They do sound similar, so I wanted to make the distinction.

Some of the players in this are Liberty Reserve, Crowne Gold, E-Bullion, E-Dinar, E-Gold, Goldexchange, GoldMoney, Pecunix, and Virtual Gold. I wouldn’t spend too much time looking for one that allows independent verification of gold on deposit or amount sold to user accounts, as most will not disclose that information. Also make sure you’re at the top of your game with antivirus and Internet security programs setup, because many malware and spyware programs look for you to login to such accounts so they can send your account information to the author of the trojan or virus for subsequent looting.

I would say I’m not trying to scare anyone, but I’d be lying. This is high risk, it’s not like buying a krugerrand from a reputable coin dealer and holding it in your hand. There’s no regulation, and no guarantee or oversight by financial authorities.  It’s all self governed by the private companies, so you can figure out where all the risk lays.

They say gold should be about 5 percent of your investments, both as a hedge against inflation and market volatility. I would personally recommend you buy it through a more stable channel than this method. If you’ve got an online investment account somewhere already, you can be sure they offer a way to buy gold that’s stored in Fort Knox or the Federal Reserve bank in NYC. I’d sleep a lot better at night knowing it’s there, than an email from a company who may or may not have any gold saying I own it, with no accountability or financial regulations.