Gold guide
Gold: SGB vs gold ETF vs physical
Indians love gold — but how you buy it changes your returns a lot. All three track the same gold price; the differences are in extra income, cost and liquidity.
Side by side
| Feature | SGB | Gold ETF | Physical |
|---|---|---|---|
| Extra income | 2.5%/yr interest | None | None |
| Cost | None | Small expense ratio | 8–20% making + GST |
| Tax at maturity | Tax-free (held to 8 yrs) | As capital gains | As capital gains |
| Liquidity | Low (best held 8 yrs) | High (trade any day) | Medium |
| Risk | Sovereign | Fund/tracking | Storage, purity |
How to choose
Long-term hold? Sovereign Gold Bonds win — gold price plus 2.5% interest plus tax-free maturity. Want to trade or need flexibility? A gold ETF. Buying jewellery? That is consumption, not investment — enjoy it, but do not count it as your gold allocation.
Frequently asked
Why is a Sovereign Gold Bond usually the best?
An SGB tracks the gold price AND pays 2.5% a year in interest, and if held to maturity (8 years) the capital gains are tax-free. That extra interest and tax break make it hard to beat for long-term gold holdings.
When is a gold ETF better?
When you want liquidity. ETFs trade on the exchange any day, whereas SGBs are best held to maturity. ETFs charge a small expense ratio and have no interest, but you can enter and exit freely.
Is physical gold a bad investment?
For investment, usually yes — you lose 8–20% to making charges and GST, face storage and purity risk, and get no interest. Buy physical only for use (jewellery), not to grow wealth.
Estimates for planning, not investment advice. Gold prices are volatile; hold gold as a small diversifier, not a core holding.