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Sovereign gold bonds or physical gold: Where to invest?

Sovereign gold bonds or physical gold: Where to invest?

Sovereign gold bonds or physical gold: Where to invest?
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By Anshul  Dec 28, 2021 10:45:17 AM IST (Updated)

Sovereign gold bonds vs physical gold: Gold bonds offer better returns than physical gold but have a longer lock-in period. So, which is a better choice? Experts help answer that

Gold is an evergreen investment for Indians. And these days investing in the yellow metal is possible in various ways from holding physical gold in the form of jewellery, coins and bars to Gold ETFs or the latest tranche of the Sovereign Gold Bonds (SGB).

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Over the years, SGB has emerged as one of the preferred non-physical forms of investment in gold. Unlike physical gold, SGBs provide handsome returns and on top of it give tax benefits, according to experts.
Here are the major differences between physical gold and SGBs (Compiled by Vidit Garg, Director at MyGoldKart):
Parameters     Physical Gold  Sovereign Gold Bond
PricePhysical gold prices are not uniform.The government determines the issue rate.
Lock-in periodNo lock-in periodFive years lock-in period and mature only after eight years.
InvestmentGold biscuits or coins are available in the standard denominations of 10 grams. Hence, it requires a huge investment to buy physical gold.The gold bonds are issued in units. One unit is equal to 1 gram. The minimum investment is 1 gram of gold, while the maximum limit is 4 kgs of gold per investor.
StorageThere is storage cost and risk associated with physical gold.Gold bonds are kept in RBI books and demat form. So, these remain safe.
Total returnsLower than actual return on goldHigher than actual return on gold (Due to the interest paid on the bond during holding period) 
So, which is better for investment?
Sovereign gold bonds are for people who want to invest in the yellow metal for long-term horizon and want to benefit from gold price appreciation without dealing with physical gold, Nitin Misra, Co-founder at Indiagold told CNBC-TV18.
"SGBs provide the benefit of capital gains tax exemption if held for complete 8 years and also 2.5 percent assured annual return on the investment. Physical gold in the form of jewellery, on the other hand, is an age choice across socio-economic classes for people who want the joy and satisfaction of owing gold physically for consumption and yet have the option of liquidity," said Misra.
The Reserve Bank of India (RBI) issues SGBs multiple times in a year and fixes a price for each issuance. Users can buy or sell SGBs during the tranche or in the secondary market.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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