Introduced on November 5, 2015, to reduce gold imports in India, the Sovereign Gold Bond (SGB) is a government initiative that allows you to invest in gold without holding it physically. The Reserve Bank of India (RBI) issues these bonds and you have to pay in the multiples of 1 gram gold price to buy SGBs.
As per sovereign gold bond latest news, the SGB scheme has been discontinued in Budget 2025 due to the high costs of borrowing for the government. If you are an active investor in SGB or looking to invest in gold, this article will guide you on various ways you can still invest in gold.
Reason for Sovereign Gold Bond Scheme Discontinuation
As per the government of India, the main reason for the discontinuation of SGBs is the high cost of borrowing. The gossip of discontinuation started after the full-year Budget 2024 was released on 22 July 2024.
The finance minister did not share any updates regarding SGB and new tranche issuance for a few quarters. In an interview with Outlook Business earlier this month, Mr Ajay Seth, Secretary of the Department of Economic Affairs (DEA) said, “The recent past experiences have been that this has been a rather fairy high-cost borrowings for the government. As a result, the government has chosen not to follow that path”.
In Budget 2025, it was officially confirmed that no new SGBs will be issued by RBI and the Government will pay for the rest of the SGBs available in the market.
Options available to Invest in Gold without Sovereign Gold Bonds
Here are some ways to invest in gold after the discontinuation of SGB:
-
Gold ETFs (Exchange Traded Funds)
Gold ETFs (Exchange Traded Funds) represent physical gold in paper or dematerialised form. You can trade them like stocks on exchanges such as the NSE and BSE. After sovereign gold bonds, these are some of the best investment options in gold due to their high liquidity, and low expense ratio (compared to gold mutual funds). Let us see the advantages and disadvantages of investing in gold ETFs:
Advantages:
- You can trade gold ETFs on stock exchanges.
- Gold ETFs offer high liquidity, enabling investors to quickly buy or sell units. Furthermore, you don’t need to pay the price of one gram of gold to invest in gold ETFs. In contrast, the low liquidity and high minimum investment value of SGBs can be a significant barrier for new investors.
- It eliminates the need for physical storage, insurance, and other costs associated with owning physical gold.
Disadvantages:
- Since gold ETFs are market-linked, they may not perform as well as physical gold during times of economic uncertainty or geopolitical instability.
- ETFs may not always perform perfectly tracking the underlying gold price as there are management fees and other expenses involved.
-
Gold Mutual Funds
Gold mutual funds are a category of mutual funds that invest in gold or gold-related assets, such as physical gold bullion, gold exchange-traded funds (ETFs), etc. Following are the advantages and disadvantages of investing in gold mutual funds:
Advantages:
- Gold mutual funds can help you diversify your investment portfolio, reducing the risk during market volatility.
- Gold funds eliminate the concerns of storing, purity, and theft associated with physical gold.
- Gold mutual funds provide easy liquidity, as you can seamlessly redeem the units for cash.
Disadvantages:
- Fund managers charge fees for managing gold funds which reduces overall returns.
- Returns on gold funds are subject to taxes, which can impact the profitability of your investment.
-
Digital Gold
Digital gold provides a modern way to invest in gold without the need to buy gold physically. It allows you to buy, sell, and store gold online via digital platforms. Read the following section to know the pros and cons of investing in digital gold:
Advantages:
- You can buy digital gold for as low as ₹10 which helps small investors to buy gold.
- You can redeem your digital gold in exchange for physical gold such as gold jewellery and gold bars.
- You can buy or sell digital gold instantly through trusted online platforms or mobile apps.
- Digital gold boasts 24K purity and is certified by the government, ensuring 99.99% purity and minimizing the risk of fraud.
- Digital gold provides easy access, storage, and liquidity for investors.
Disadvantages:
- The difference between the buying and selling price of digital gold when converted to physical gold is 8-10% due to the storage cost, insurance charges, etc.
- When you buy digital gold, you have to pay 3% GST on the price of the gold.
- You cannot hold digital gold for a lifetime. After a certain period, you have to sell it or get the delivery.
-
Physical Gold
Physical gold is the tangible form of gold that you can own, such as coins, bars, and jewellery. Unlike paper gold, such as gold ETFs or gold mining stocks, physical gold provides you with direct ownership of this precious metal. Let us see the advantages and disadvantages of investing in physical gold:
Advantages:
- Owning physical gold gives you a sense of security because it is a tangible asset that you can feel and touch physically.
- Gold is visually appealing which makes it a satisfying investment to own.
- You can transform your physical gold into jewellery to increase its usefulness beyond simple investment.
- Physical gold is a valuable commodity globally which makes it relatively easy to buy and sell.
Disadvantages:
- Physical gold requires secure storage and insurance, which can incur additional expenses in terms of bank locker charges.
- It may be difficult to authenticate the quality and purity of physical gold.
- Regulators have repeatedly warned investors of scams involving gold. You should follow extreme caution and due diligence before buying gold physically.
Can I Still Buy SGBs?
Yes! You can still buy SGB from the secondary markets (NSE and BSE) from the existing investors. To buy SGB, you just need to have a demat account with a trusted broker. You can then deposit funds in your trading account and buy the SGBs available in the market.
Remember, there are different types of SGBs available in the market based on their series and maturity date. Before investing, you should carefully understand its face value, maturity date, interest amount, and date of issuance from the official website of NSE.
Are you looking to open a new demat account? No worries! Open your FREE demat account with Torus Digital and enjoy lifetime freedom from annual maintenance charges.
