A digital gold balance is a claim on metal held elsewhere. What that claim is worth depends almost entirely on the terms under which it can be turned into physical bars or coins.
Redemption is what ties the balance to metal
Without a redemption route, a digital balance is a contractual promise whose value rests on the provider honouring it in cash at a price the provider calculates.
With one, the balance is connected to physical inventory that must actually exist in sufficient quantity to satisfy requests as they arrive.
That connection is what keeps the digital price aligned with the metal price, because a wide divergence would make redemption or purchase obviously profitable and close the gap.
Minimum sizes create a floor
Metal cannot be delivered in arbitrary fractions. A provider has to hand over a manufactured product, and the smallest one available sets the minimum redeemable amount.
Balances below that threshold can usually only be sold back to the provider for cash, which makes the redemption right theoretical for the smallest holders.
Providers differ considerably in where they set that floor, and the difference is worth checking before a balance is built up in small increments.
Fees appear at the point of conversion
Redemption typically carries a fabrication charge covering the cost of the bar or coin, along with delivery, insurance and sometimes a separate administrative fee.
Those charges are levied at conversion rather than at purchase, so a holder who only ever transacts digitally may never encounter them.
They are the reason the effective cost of a small redemption can be a significant fraction of the metal's value, particularly on the smallest permitted sizes.
The metal behind the balance may not be identified
Some providers allocate specific bars to specific holders and publish serial numbers; others hold a pool of metal against the total of all customer balances.
Pooled arrangements are cheaper to operate and give the holder a claim on a quantity rather than on identified property.
The distinction has little effect in normal conditions and considerable effect if the provider fails, which is precisely when the holder is least able to change it.
Verification is what makes the promise checkable
Independent audits, published vault reports and named custodians allow an outsider to test whether the metal backing the balances is present.
The useful audit reports both the metal held and the total customer liability, since either figure alone says nothing about whether they match.
Where such reporting is absent, the holder is relying on the provider's own statement, which is a different kind of exposure from holding metal outright.