Investing in Physical Gold vs Gold ETFs vs Sovereign Gold Bond

  • Posted By :
  • Monday Nov 05, 2018

Physical gold vs gold ETFs vs gold SGBs: What should you invest in this Dhanteras

Indians have always had a particular inclination towards gold. It is not only a commodity of prestige and fashion but also a great investment option. Gold is believed to have a good hedge against inflation. Its price tends to rise when the cost of living increases. This means there’s a good chance that your precious metal investments won’t lose its value along the years.
Buying gold is particularly considered auspicious during Diwali. Many people buy gold on the first day of Diwali, which is called Dhanteras. Doing so is believed to bring in good luck and fortune.
However, these days, gold investments are not limited to physical yellow metal. Physical gold alternatives like Gold Exchange Traded Fund (ETF) and Sovereign Gold Bond (SGB) have gained popularity because of their distinctive features.
So, this Dhanteras, if you’re looking to invest money in gold, consider gold ETF and gold SGB, along with physical gold too. Take a look at all three before you choose your gold of choice this festive season. 

Physical gold

Physical gold is a tangible asset with a finite value available in different physical forms like biscuits, coins, and jewellery. For an individual, ‘sentimental value’ plays a vital role when it comes to physical gold. In fact, throughout history, gold has emerged as an unparalleled form of wealth creation asset. Buying physical gold has been the most conventional form of investment which could be in the form of jewellery, coins or ingots. It gives you the added benefit of using your investment as a stylish accessory. However, if you’re buying it solely for investment purpose, you need to be cautious as gold jewellery resale value is comparatively lower than gold coins and ingots. Here are a few advantages and disadvantages of buying physical gold.

Advantages of Physical Gold :

Disadvantages of Physical Gold :

Gold ETF

Gold Exchange Traded Funds (ETFs) are funds which are traded in stock exchanges and can be bought and sold during trading sessions. Gold ETFs do not have a physical form but are traded almost close to the physical gold price. You can invest in Gold ETFs through Demat account. You can buy and sell it in real-time during trading sessions.

Advantages of Gold ETF :

Disadvantages of Gold ETF :

You can buy gold online on that offers you multiple gold ETF options.

Gold SGB

Sovereign Gold Bond (SGB) is a new type of gold investment introduced by the government. The gold bonds for investments can be purchased at select post offices, designated banks and through stock exchanges. The SGBs are issued by the Reserve Bank of India (RBI) and are traded on exchanges.

Advantages of Sovereign Gold Bond (SGB) :

Disadvantages of Sovereign Gold Bond (SGB) :

Comparison of Physical Gold, Gold ETFs and Sovereign Gold Bond


Physical Gold

Gold ETFs

Sovereign Gold Bond

Subscription Limit

No limit

Minimum: 1gram

Maximum: No limit

Minimum: 1 gram

Maximum: 4kg per person & Hindu undivided family (As per rules for SGB 2018-19) and 20kg for trusts and similar entities

Lock-in period



5 years


Lower than actual return*

Lower than actual return*

Higher than the actual return

Liquidity/ Tradability




Safety & Security

Low (Due to higher risk of theft and cheating)

High (Due to low risk of theft and cheating)

High (Due to low risk of theft and cheating)

Long-term Capital Gain (LTCG)

LTCG applicable after 3 years

LTCG applicable after 3 years

LTCG applicable after 3 years (No capital gain tax if held till maturity period)

Acceptance as collateral for loan




Purity of Gold

Purity check needed

High (As Gold ETFs held in electronic form)

High (As SGB held in electronic form)

Storage Cost



Very Low

As you see, it is worth considering gold ETF and SGB as a means of gold investment this festive season. Like physical gold, these investments have the benefit of capital appreciation. Plus, there are more advantages like long-term capital gains and security too.

Physical Gold v Gold ETf v Gold SGB

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