Sovereign Gold Bonds vs Physical Gold: Where You Should Invest?

For Aegis, Gold has been an appealing investment option due to its capacity to protect wealth and act as a guard against economic risks. In recent years, investors have had a new option i.e. Sovereign Gold Bond, but still, most people like to buy actual Gold. The article discusses the benefits and drawbacks of purchasing Sovereign Gold Bonds and actual gold. This will allow many buyers to make decisions depending on their investment objectives and preferences.

1. Sovereign Gold Bonds (SGBS):
   1. Government-backed investment: These are issued by the Government of India and it is a safe and dependable investment. These are backed by Gold and carry a sovereign guarantee and lowering the counterparty risk.
   2. No Security and storage issue: Unlike actual gold, SGBs do not require storage or security preparations. They are stored in Demat form as electronic securities, making them simple and easy to handle.
   3. Fixed Interest rate: SGBs have the added benefit of receiving fixed interest income. The bonds pay an annual interest rate that is paid semi-annually which increases the overall return on investment.
   4. Liquidity and tradability: SGBs are listed on stock exchanges, providing liquidity and secondary market trading. Subject to market conditions, investors have the opinion to terminate their investment before maturity.
2. Physical Gold:
   1. Tangible Item: It is in the shape of bars, coins or jewellery, and provides the gratification of having a tangible item. It has emotional and sentimental worth and may be kept, appreciated, and passed down through generations.
   2. Ease of Access: It is easily accessible through a variety of merchants and jewellery stores. Investors have more control over their investment since they may select the precise form, design, and purity degree of gold they want.
   3. Accepted by Market: These are widely recognized and accepted across the world, making it easier to convert into cash when needed. It is commonly traded in a variety of marketplaces and may be purchased via dealers or shops.
   4. Worth: Some rare or collectible gold coins may have numismatic worth, making them attractive investments in addition to their intrinsic gold value. This feature provides a distinct dimension to actual gold ownership.
3. Factors to Consider for Both Options 
   1. Transparency: Physical gold is widely available in the market. SGB prices may not be so transparent
   2. Lock-in -period: SGB has a lock-in -period of 8 years with an option to depart after the fifth year. Physical gold provides greater flexibility because it may be purchased and traded at any time with no lock-in -period.
   3. Storage: Physical gold must be properly stored for any kind of theft and damage and incur additional expenses for storage in lockers or in any other form but with SGBs no such problem is there for storage.

The article is authored by Dr. Swati Sharma, School of Management, IMS Ghaziabad University