Eliminate the risk of physical gold


Eradicating the old Taboo

Buying physical gold has been practised in India for decades. It is considered one of the safest investments in the long run. But are you aware of all the risks that come along while you invest in physical gold? The primary one is its storage. Although the risk is associated with most of the investment avenues, but a good investment scheme is considered as the one that comes with the least amount of risk associated as compared to its returns. So, Is gold safe? Maybe, maybe not.

But what if someday someone comes and tells you that you can now invest in gold without keeping it physically, in its safest way possible? That is actually possible now.



Sovereign Gold Bonds or SGBs are government securities armed by the Reserve Bank of India (RBI) on behalf of the Indian Government. They are dominated in grams of gold and are also considered as a close substitute for gold i.e., the investors have to pay the issue price of the bonds and the bonds will be redeemed at the time of maturity instead of actually buying physical gold. As of now, the issue price has been set as Rs. 4,791 by the RBI.

One who invests in SGBs stays protected since his investment can be encashed at the ongoing market price at the time of redemption/ premature redemption while the interest is paid every 6 months on the investment amount rather than the ongoing market price.  Investors are also entitled to periodical interest of 2.5% p.a.




      The main benefits offered by investing in SGBs are:

  • Unlike physical gold, it does not include the risk and cost of storage.
  • SGBs are free from the issues related to the purity of gold.
  • One can jointly hold SGBs with any other person.
  • Minors can also invest in it, but the application has to be made by his/her guardian.
  • No other form of investment in gold other than SGBs offers interest income.
  • One can freely transfer or gift these bonds to a relative or any person who fulfils the eligibility criteria.
  • These bonds can also be used as collateral for loans and advances.



Difference between Physical Gold and SGBs:




A person who invests in physical gold is not entitled to any kind of interest.

A person who invests in SGBs is entitled to an interest of 2.5% p.a. (paid every 6 months)

Storing or reserving physical gold includes high risk and, as well as cost.

SGBs are in form of certificates, therefore the problem related to storage is eliminated.

There is no defined lock-in period for holding physical gold.

The Lock-in period for holding SGBs is eight years. However, one can choose to redeem the bonds from the fifth year of holding

The purity of physical gold can be easily compromised. And there are also chances of getting cheated by the gold dealer.

Determining the purity of SGBs is not an issue as they are certified by the Government itself.

There is no limit on holding physical gold. It is not even mandatory to reveal the source up to a certain quantity but after that, proper documentation is required.

SGBs can be stored up to 4kgs for HUFs and individual investors, and 20kgs for other trusts

Physical gold can be easily encashed during any unforeseen situation.

SGBs can be traded in secondary markets but they carry lower levels of liquidity.




Who should invest in SGBs?

People having a keen interest in gold investments but carrying a low-risk appetite can consider purchasing Sovereign Gold Bonds. It can also become a source of fixed income. The expense of buying or selling the SGBs is also nominal.

Therefore, if you are on the lookout for a long-term; safe investment plan to make good and healthy returns, a gold bond could be the right choice.



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