Sovereign Gold Bond vs Physical Gold: In India, gold is regarded as one of the most important commodities for both cultural and commercial reasons. On auspicious events, such as weddings, religious services, and other rituals, gold jewellery are important.
Comparing Digital Gold and Sovereign Gold Bonds (SGBs) for Investment
However, if you are only interested in purchasing gold as an investment, you should think about purchasing digital gold or the Sovereign Gold Bonds (SGBs) offered by the RBI. SGB and actual gold will be compared in this post to discover which is more advantageous.
Comparing the Advantages and Disadvantages of Digital Gold and Sovereign Gold Bonds
- Because physical gold may be sold whenever it is desired, it has better liquidity than SGB, which has a five-year lock-in period.
- SGBs offer a 2.5% interest rate, a sovereign guarantee, and no storage fees, although real gold has a separate storage fee.
- SGBs are safer than actual gold because there is never a chance of theft with them, unlike with physical gold.
- SGBs have an investment cap and are difficult to find, but physical gold has no investment cap and is readily available.
| Parameter | Sovereign Gold Bonds | Physical Gold |
| Type of Ownership | Both a print copy and an electronic version can be purchased. Certificates are used to demonstrate investments. | can be bought as bars, coins, decorations, and biscuits. We always give you a receipt for your purchases. |
| Prices | Although prices are determined by the market, the Indian government uses the average price over the previous three days to set issue dates. | Prices are erratic and change occasionally (market-dependent). |
| Liquidity | The secondary market has relatively little liquidity, and redemption is only possible after five years. | Since it may be sold at any time in a jewellery store, it is simple to liquidate. |
| Investment tenure | The RBI set the tenure at eight years. | The investment tenure is not predetermined. |
| Lock-in period | After five years, redemption is possible; however, if there is interest, you can sell on the secondary market. | No lock-in period exists. |
| Rate of interest | Interest is paid on a half-yearly basis and has a set rate of 2.5% each year. | The interest is not available for purchase with actual gold. Returns are based on how much gold prices rise. |
| Demat account | The ownership of a demat account is optional. However, you must keep the SGBs you purchase online in a demat account. | The existence of a demat account is not necessary. |
Understanding Sovereign Gold Bonds (SGBs) – A Paper Investment in Gold
The RBI issues sovereign gold bonds (SGBs) as debt instruments or bonds on behalf of the Indian government. The dates these bonds are issued are set by the government. These bonds are issued in accordance with units. One gramme of gold is represented by each unit. One gramme is the required minimum investment in SGB. The maximum investment, however, is determined by the type of investor. The maximum restriction is 4 kilogramme for individual investors and Hindu Undivided Families (HUFs), and the maximum limit is 20 kg for private trusts and other companies. Simply put, a sovereign gold bond is gold that you possess as paper. After purchasing a gold bond, you receive a certificate. SGBs are available for purchase in post offices, private and foreign banks, stock exchanges, and branches of nationalised banks. Additionally, you can buy these bonds online.
Investing in Physical Gold
You can buy real gold in the shape of bars, jewellery, coins, biscuits, and other tangible objects. In India, you are permitted to buy, store, and sell as much gold as you like starting at a minimum weight of one gramme. Any jeweller in your neighbourhood will sell you gold based on purity. These days, you can buy gold through respected jewellers’ official websites and internet marketplaces. When comparing SGB with physical gold, one of the key differences between the two is that physical gold investments don’t require the assistance of a broker or other third party. So, the investment process is entirely under your control. The advantages of holding actual gold are numerous.
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