Comparing Gold Investment Avenues: A Comprehensive Overview
In 2015, the Government of India unveiled a groundbreaking initiative under the Gold Monetization Scheme: Sovereign Gold Bonds (SGBs). Designed to streamline the investment process in gold, these bonds offered investors an opportunity to ride the waves of gold prices without the complexities associated with physical gold transactions.
Let’s delve into the characteristics of each investment avenue to better understand their merits and demerits –
| Features | Physical Gold | Digital Gold | Gold ETF | Sovereign Gold Bond (SGB) |
|---|---|---|---|---|
| Purity | Purity not guaranteed | Purity is not an issue | Purity is not an issue | Sovereign Guarantee |
| Liquidity | Highly Liquid | Instant Credit in E-Wallet | Liquidity at T+1 | Liquidity at fair value is not available for t<5 years |
| Risk | Higher risk of theft | Safe and insured No regulator | Safe and insured | Backed by Sovereign guarantee |
| Carry Benefit | No carry benefits | No carry benefits | No carry benefits | Fixed interest income |
| Key Costs | Design/Making, Insurance/Storage & GST (3% of purchase price) | GST (3% of purchase price) & Spread (approx 6%) | Total costs of 0.5% to 1% annually inclusive of expense Ratio, Demat Account Charges & Brokerage | No visible expenses |
| Capital Gains Tax | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG | If T < 3 years, taxed at marginal rate of taxation, STCG if T > 3 years, taxed at 20% post indexation, LTCG (No capital gain tax if SGB are redeemed on maturity or early redemption) |
Above everything, keep in mind that online investors receive a ₹50 per gram discount when purchasing Sovereign Gold Bonds (SGB).
Sovereign Gold Bonds are smart investments to make. The price of SGBs is linked to gold, which means that if the gold value rises, your SGB also becomes more valuable. Sovereign Gold Bonds (SGBs) are way better than physical gold.
Hence, SGB is one of the best ways to achieve portfolio diversification with investment in gold.
How to invest in SGB?
Start investing in Sovereign Gold Bonds (SGB) today with Stocko !
