Top 5 Reasons To Invest In SGBs Over Physical Gold Or Gold ETFs

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  • Definition of Physical gold
  • Definition of Gold ETF
  • Definition of Sovereign Gold Bond
  • Understanding advantages offered by SGB
  • Concluding remarks

What is Physical gold

This is the most comprehensible format. Physical gold means the gold in its actual form, whether in the shape of the gold biscuits, gold coins, or jewellery. The yellow metal is the most recognized format of gold and has been bought, sold and owned for generations in India and elsewhere.

Additional Read: How to Invest in Gold Exchange Traded Funds?

What is Gold ETF

Gold ETFs, or Gold Exchange Traded Funds, is an investment product that represents gold in a paper or demat form. While it allows the flexibility of stock investment, it provides the simplicity of gold investment. Gold ETFs trade on the cash market of NSE (National Stock Exchange) and can be traded at market price.

What is Sovereign Gold Bond

Sovereign Gold Bonds or SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Indian government. These bonds are issued in several tranches during the financial year and act as an alternative for holding physical gold. SGBs are denominated in grams of gold.

While gold is a lucrative and less-risky investment, SGBs offer a unique set of advantages that makes it stand out from other formats. Here is what you need to know.

Additional ReadWhy Should I Invest in Sovereign Gold Bonds (SBG)?

Why Invest in Gold

Making an investment in gold is a great way to protect and, also, increase your money. Here is a quick summary of benefits: 

  • Gold’s value has increased over the years which makes it a great long-term investment product.
  • Gold price increases when currency value falls which makes it a suitable asset during times of global crisis, like in COVID pandemic 
  • Gold is always in demand which makes selling it off easy

Additional Read: How to Invest in Gold Exchange Traded Funds?

Advantages of Sovereign Gold Bond (SGB)

It comes with government’s assurance

One of the biggest advantages of SGBs is that it comes with an assurance that it is issued by the Reserve Bank of India on behalf of the government of India. This assurance eliminates all the worries about forgery, fraud and purity of the product that is associated with buying physical gold or Gold ETFs. 

Ease of storage

Sovereign Gold Bonds exist in the records of Reserve Bank of India and in the dematerialised form, which eliminates the worrisome safekeeping and threat of theft that is always associated with physical gold. 

You get semi-annual interest

SGBs beat a fixed-rate interest on the initial investment that you will make and it will be credited to your bank account on a semi-annual basis. It will mean an added income to you while your investment grows safely and securely at the market price, which is unlike the physical gold or Gold ETFs in which cases there is no additional income.

Get loan

You can secure a loan by putting your SGBs as collateral before the banks and other financial institutions. The Loan-to-Value ratio of the SGBs is same as applicable to gold loans prescribed by RBI from time to time. 

Enjoy tax redemption

You will get to enjoy tax redemption on the capital gains made on your investment, however, interest on the bonds will be taxable as per the provisions of the Income Tax Act 1961.


Gold has emerged as one of the most significant long-term investment products as its market price has increased dramatically in recent years. Investing in gold, however, comes with its own shortcomings, like the extracare that is needed for its safekeeping and the risk of exposure to frauds. SGBs or Sovereign Gold Bonds cut the risk of safekeeping, come with a government assurance and a regular interest payback, making it a perfect investment product.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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