In order to compare or analyse how these instruments stack up against one another, we’ll take the help of data tabulation as follows: –

Parameters Sovereign Gold Bonds Physical Gold Gold ETF 
Investment limitA minimum of 1 gram and maximum of 4 KG in case of an individual (as per SGB 2020-21 rules)
No such limit
A minimum of 1 gram and no maximum limit
Safety/ SecurityIt is the safest in terms of lower risk of theftIt has the highest risk of theft than other formsIt is also comparatively more safe with regard to theft
Liquidity It involves limited liquidityThey are highly liquid They are also highly liquid 
Annual fund management fees (AMC) It does not include AMCPhysical gold also does not include AMCIt includes AMC
Total ReturnsSGB have higher than actual return on gold because of the interest payable on bonds during the holding periodIt has lower than actual return on goldIt also has lower than actual return on gold
Exit / redemption option Only from 5th year Exit at any timeExit at any time
Long-term Capital gains (LTCG)It is applicable after 3 years except, when it is held till maturity, then no capital gain tax is applies
It is applicable after 3 years
It is also applicable after 3 years
Tradability/ LiquidityThese are tradeable on exchange, can be redeemed from 5th yearThey are liquid and tradeable but also involves more risk of theft or cheating than the other two options. They are tradeable on exchange
Storage/Insurance charges No Yes No 
Quality check required No Yes No 
Brokers charge on buyingNoNo Yes
Capital depreciation/ appreciationYes
Purity of Gold High as it is in Electronic Form 
Purity of Gold always remains a high concern
High as it is in Electronic Form 
Interest on investmentYesNo interest on investmentNo interest on investment as there is no dividend option provided
Collateral against Loan Yes Yes No 
Sovereign GuaranteeYes NANo
Storage Cost Very Low as it is held in the books of Central bankIt’ll include high locker cost if the gold is kept in lockersVery Low as they’re held in demat form.
Purchase value (if prices are taken as that on 1st April 2019)INR 3117 ( last 3 days average closing price as per SGB manual) 
INR 3284 (INR 2985 per gram 22k + value addition at 10% – wastage/ tax/ making charges) 
INR 3256 ( value per unit INR 3163 + value addition 3% – tax) 
Return on holding period (if we assume the price of gold after 8 years to be INR 4000)28.32%  ((4000-3117)/ 3117*100) 
21.80%  ((4000-3284)/ 3284*100) 
22.85%  ((4000-3256)/ 3256*100) 

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

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We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

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