Buying gold or Sovereign Gold Bonds in Jan 2022? SGBs are better but wait a bit

Akshata Kamath
Akshata KamathJan 11, 2022 | 18:14

Buying gold or Sovereign Gold Bonds in Jan 2022? SGBs are better but wait a bit

If you come from an Indian household that is obsessed with gold, you might have grown up seeing people buying gold and storing them in their tijorisThese were bought as investments, became show-off items during weddings, and helped families tide over rough times.

In fact, in many families, there is such an emotional bond with gold that when someone sells their physical gold, it is seen as a sad thing, because the family is going through a rough time. Why else would you sell your physical gold?

Photo: Getty ImagesPhoto: Getty Images

But in 2022, as generations shift and people become more aware and interested in better modes of investment, the sovereign gold bond seems like the 2.0 version of the physical gold. But is it a better investment than the physical gold? Yes. In Jan 2022? Probably not. Here's why.


Physical gold investments can be directly bought from local or international jewellery stores like Tanishq, Tribhovandas Bhimji Zaveri, etc, or from online stores. As there is no broker involved, nor any limit to purchase the gold, there is minimum risk involved. Though it is always a good practice to safely maintain the invoices, as they are proof of the purchase and help during income tax return filing (or subsequent raids like this one, lol).

Photo: Getty ImagesPhoto: Getty Images

However, Sovereign Gold Bonds (SGB) are debt securities (that look like paper-based certificates) that are issued by the RBI on behalf of the government and are denominated in units of gold. Meaning, just like physical gold is sold in terms of 'grams', SGBs are sold in the form of 'units'.

When you buy One Unit of Bond, it is equivalent to buying One Gram of Gold. The difference will be that you won't get the physical yellow gold. Instead, you will get a paper that says you hold a unit of gold.

In an SGB, the paper holds value unlike the physical gold. This paper will get you regular semi-annual interest from the government and can be sold in the stock market to make capital gains.   


The government launches its SGBs to the public in tranches (or slots) during the year and till date, the government has launched about 8 tranches of SGBs.

  • During November 29-December 3, 2021, it launched Tranch 8 of SGBs at the price of Rs 5,127/gram (post the online discount of Rs 50/gram).
  • Between January 10-January 14, 2022, the government is listing Tranch 9 of SGBs at Rs 4,736/gram (post the online discount of Rs 50/gram). 

The minimum investment is for 1 gram, while the maximum investment is 4 kg/year for individuals and HUF.  For trusts, the maximum limit is enhanced to 20 kg/year.

Photo: Getty ImagesPhoto: Getty Images


SGBs are better than physical gold in the following criteria: 

  1. SAFETY AND PURITY - Physical gold has a high risk of wearing out or theft, unlike SGBs, which are easy to keep safe. Also the purity of physical gold determines its value and without its quality marking, gold can be less valuable over a period of time, unlike SGBs.   
  2. REGULAR EARNING - SGBs get you a regular interest of 2.5% per annum on the issue price on semi-annual basis. Meaning, a bond of Rs 100 will earn you interest of Rs 2.5 per year but Rs 1.25 will be paid at the end of each 6 months. Can you make money by depositing gold in a locker with the government? Yes, you can use government's Gold Monetisation Scheme and the interest is 2.5% per annum. 

Fluctuating gold rates. Photo: Getty ImagesFluctuating gold rates. Photo: Getty Images


The gold prices as on today are Rs 49,190 for 10 grams of gold, ie. Rs 4,919/gram of physical gold. As mentioned above, 1 SGB is valued at Rs 4,736/gram, so there is a gain of about Rs 200/gram that the investor would make if he invests in SGBs today instead of physical gold. Plus, as he would receive interest of 2.5% over the year and would not have to pay tax at the end of the 8-year maturity period, it is a BIG win for the investor.  

2 factors that influence gold prices are:

1. Negative impact of Omicron will increase the value of gold, like the previous time when Covid was rampant in 2021.

2. In US, as government's stimulus are withdrawn, interest rates are set to spike, which will be detrimental for gold. 

If the international gold prices fall, then as per technical experts, the price of SGBs are currently slightly higher than they should be (ie. short term basis). If gold prices fall, so will the value of SGBs in the coming months. Thus, it is better to wait for the corrected, reduced prices and invest in the subsequent tranches.

Last updated: January 11, 2022 | 18:14
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