Gold ETF vs Sovereign Gold Bond vs Physical Gold

Housing Finance

Are you planning to buy gold? Do you have trouble finding something in which to invest? You are confused between gold ETFs, sovereign gold bonds, and physical gold? So now, in this article, you will get all the information about what gold ETFs areWhat are sovereign gold bonds? Whatical gold? and the difference between a gold ETF, a sovereign gold bond, and physical gold that you should know.

What are gold ETFs?

Gold ETFs track US gold prices. These passive funds track gold prices by buying a basket of bullion. Like other gold ETFs, investors can buy through a Demat account.

One gold ETF is worth one gram. The Bombay Stock Exchange and the National Stock Exchange trade exchange-traded funds (ETFs) like this.

Gold exchange-traded funds (gold ETFs) are the only way to profit from gold’s market spread. Gold exchange-traded funds (Gold ETFs) let investors sell their shares at the domestic gold price.

What are sovereign gold bonds?

Gold bonds issued by a sovereign nation.

As a liquid investment option, sovereign gold bonds can replace the need to buy real gold. Bonds are a type of debt security that pays their holders interest and promises to return the principal when the bond matures.

The Reserve Bank of India (RBI) is responsible for issuing Indian government sovereign gold bonds (SGB). Investors must pay the issue price in cash and may request a cash redemption of their bonds at maturity. Interest is paid regularly, and investors are repaid based on the bond’s value and the price of gold at the time of repayment.

Sovereign gold bonds can be purchased in increments of one gram up to four kilos. Sovereign gold bonds also have a maturity of 8 years and pay interest at a rate of 2.50% per year, compounded every six months.

What is physical gold?

Physically buying gold has always been the best way to get the metal, whether you want it for yourself or as an investment. Physical gold is the underlying asset for both physical gold exchange-traded funds and sovereign gold bonds in India. This sets the price of gold in the country.

As the price of gold gradually climbs over time, investors around the world view it as a valuable asset that may be used as a hedge against the risk of loss in other investments. A big benefit of owning physical gold is that you can get a gold loan with low interest rates.

Lenders can successfully take out gold loans with physical gold pledges as collateral. The loan amount and interest rate for a gold loan are both determined by the total value of the gold pledged as collateral. Lenders will store the borrowers’ gold in a secure location during the loan term and return it to them after the loan is paid in full.

The most direct way to get gold is through physical gold. Bullion is the name for large amounts of gold, which can be made into bars or coins. Gold bullion is worth more because of how much there is and how pure it is than because of its face value. Even if a gold coin has a face value, its value on the market is based on how much fine gold it contains.

Gold ETF vs. sovereign gold bond vs. physical gold

  • Unlike sovereign gold bonds, which may be purchased and sold around the clock, exchange-traded gold ETFs and SGB are only available for investment between the hours of 9 a.m. and 3:30 p.m. Because of this, liquidity is the key distinction.
  • SGBs have a 5-year lock-in term and a significant transaction cost if sold before maturity. In contrast, sovereign gold bonds are not subject to any such lock-in and might be sold the very next day if desired.
  • In exchange for Sovereign Gold Bonds, you receive the equivalent monetary value of gold stored in a secure facility. In contrast to SGBs, sovereign gold bonds come with insurance that covers the entire value of the investment.
  • Besides the one-time GST charge of 3%, there are no further fees associated with purchasing sovereign gold bonds. The annual expenses of a gold ETF are typically between 0.5 and 1%. Contrary to gold ETFs and SGB, purchasing digital gold does not necessitate a Demat account.
  • The purity and security of physical gold in its original form are often questioned. The lack of oversight is a weakness of sovereign gold bonds. Investors in exchange-traded gold funds and gold mutual funds are exposed to market volatility. There is a small possibility of default on sovereign gold bonds due to a change in government policy.
  • Gold in its various forms (physical, digital, gold ETF, and mutual fund), is the most liquid investment option because it can be bought and sold at any time. However, sovereign gold bonds are locked up for five years and are consequently less liquid.


The purpose of this article is to give a comprehensive examination of the differences between gold ETF, sovereign gold bonds, and physical gold. You’ll need to be a financial whiz if you want to pay off your loan without going broke. Borrow only what you know you can afford to repay and work hard to pay off your mortgage and other debts as soon as possible. Your other major financial goals should not have to take a back seat if you use your own money to buy gold, and you should have enough cash left over after making the down payment.

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