Sovereign Gold Bond or SGB is issued by Reserve Bank India on behalf of the Government of India. On the basis of multiples of grams of gold with a basic unit of 1 gram, these bonds are denominated. To invest, the minimum permissible investment is 1 gram. Sovereign gold bonds offer an annual interest rate of 2.50% to the investors. Such bonds are pretty flexible as they have a maturity period of eight years but you have the option for an exit after fifth year. The redemption price depends upon the gold prices at the time you exit from the investment.
Many experts have commented positively on sovereign gold bond investment. Moreover, it is a form of investment in non-physical gold, if a buyer holds on till maturity. One of the biggest advantages is the fact that if the investor gains any capital at the time of maturity, it is tax-free. One may say it is an exclusive benefit available on gold bonds.
Gold ETFs or exchange-traded funds are available in listings on the exchanges and invest in physical gold. It should be noted that gold ETF represents 1/2 gram of 24 karat physical gold. Gold ETFs have liquidity on offer since these can be sold on exchanges anytime. Gold ETFs have the trading value which is the same as the prevailing market price of physical gold. Therefore, this gives the opportunity to the investors to buy or sell holdings at close to the market price, without paying a premium on purchase or selling at a discount. Each and every ETF unit is backed by 24 carat physical gold, held in secure vaults, and is completely insured. Liquidity flow is more on Gold funds or gold ETFs when compared to sovereign gold bonds.
Gold or fixed deposit, which is better?
If risk free investment is your top priority then gold and FD are among the best options. However, there are a few points of comparison that you must know before deciding on the right investment vehicle that will suit your situation and needs. Gold market is seen under constant flux as it is an internationally traded commodity. Several aspects like supply of gold, import, price of the US dollar, international trade relations and other aspects can impact the gold prices. Though there are chances that the value of gold will gain, a fall noticed in the market can mean that your investment in gold is struck. On the other hand, the returns in case of FD is independent of the market influence. You can also compare between the interests rates offered by different banks and choose the right bank to deposit your money. Gold investment always assures a reasonable rate of return.