What is the difference between SGBs, Gold ETFs and Physical Gold?
SGBs offer the highest returns due to additional interest, Gold ETFs provide easy liquidity, and physical gold offers ownership but includes storage and making costs.
Investors often compare Sovereign Gold Bonds (SGBs), Gold ETFs, and physical gold to choose the best way to invest in gold. Each option differs in terms of safety, returns, liquidity, and costs. The table below provides a detailed comparison to help you make an informed decision.
What is SGB ?
Sovereign Gold Bonds (SGB) are gold bonds issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are issued in denominations of grams of gold and are a substitute for holding physical gold. Their value is determined by the price of gold of 999 purity as published by the India Bullion and Jewellers Association Ltd. Investors have to pay the issue price, and the gold bonds will be redeemed in cash on maturity.
What is Gold ETF ?
Gold ETFs are a special type of exchange traded funds, that track the market price of gold. ETFs can be bought and sold through our trading platform FLIP.
SGB vs Gold ETF vs Physical Gold
| Particulars | SGB | Gold ETF | Physical Gold |
|---|---|---|---|
| Safety | High | High | Risk of theft, wear and tear |
| Returns | More than actual return on gold. | Less than actual return on gold. | Lower than the real return on gold due to making charges. |
| Tradability | Tradeable on the stock exchanges if held in demat form. Or else, can be prematurely redeemed from the 5th year of issue. | Tradeable on stock exchanges. | Restrictive |
| Trading Margin Collateral | Accepted (cash equivalent collateral) | Accepted (non-cash equivalent collateral) | Not accepted |
| Loan Collateral | Accepted | Not accepted | Accepted |
| Gains | * STCG if held for less than 3 years. | * STCG if held for less than 3 years. * LTCG if held for more than 3 years. | * STCG if held for less than 3 years. * LTCG if held for more than 3 years. |
| Storage Cost | Minimal | Minimal | High |
Which Gold Investment is Better?
- Choose SGBs for long-term investment, as they offer additional interest and tax benefits.
- Choose Gold ETFs for liquidity and ease of trading, especially for short- to medium-term investing.
- Choose Physical Gold mainly for consumption (jewellery) rather than investment, due to extra costs.
FAQ
- How can I invest in gold?
- What commodities products are available for trading on MCX?
- Is Securities Transaction Tax (STT) levied on ETFs?
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