Two popular options to invest in gold are Sovereign Gold Bonds (SGBs) and physical gold. Physical gold gives the satisfaction of tangible ownership. Meanwhile, SGBs offer guaranteed interest rates and are more convenient. 


On Bajaj Markets, you can invest  in SGBs online and earn an assured additional interest rate of 2.5% p.a. Although both are ways to invest in gold, they differ in liquidity, risk, and other aspects. Consider these factors before investing as it may impact your overall investing experience.

Sovereign Gold Bond vs Physical Gold: Key Differences

Both Sovereign Gold Bonds and physical gold have their pros and cons. Check out the key differences between them to make an informed decision.


Physical Gold

Sovereign Gold Bonds


Available in the form of coins, biscuits, bars, and jewellery

Available in digitised and paper formats


Prices are linked to the commodity and subject to fluctuations 

Additional 2.5% p.a. interest rate offered; returns are linked to the commodity 

Investment Window

No fixed investment timeline

RBI announces the subscription window


Easy to liquidate as there is no lock-in period

Comparatively less liquid and can only be redeemed after a tenor of 5 years

Lock-in Duration


5 years

Demat Account


Not required 

Risk Factor

High risk of being stolen or misplaced

Nil as they are digital and come with a sovereign guarantee

Note: The above information related to government policies is subject to change. Visit official sites for updated details.

Factors to Consider When Choosing Between SGBs and Physical Gold

Consider convenience and liquidity before going ahead with your investment. Outlined below are a few things to take into account:

  • Cost 

The making charges associated with physical gold adds to the cost. You could purchase SGBs close to the current market price of gold.

  • Safety 

SGBs are stored electronically, which eliminates the risk of theft or misplacement. The risk is higher with physical gold, and you may even have to incur bank locker charges to keep it secure.

  • Redemption 

You can redeem SGBs online in cash upon maturity, which is not the case with physical gold. You will have to sell the physical gold to access cash. But this may be lengthy and cumbersome.

  • Track Your Investments 

With SGBs, you can easily keep track of your investment value. For physical gold, you need to manually calculate the value based on the market. This cost is subject to fluctuations.

  • Investment Goals 

If you want to hold your investment for an extended period, both are great options. However, SGBs have a lock-in period, so choose accordingly.

  • Tax Benefits

Physical gold has no tax benefits, but in SGBs, the capital gains are exempt if held till maturity. This makes SGBs more tax efficient.

Frequently Asked Questions

Are SGBs backed by physical gold?

No. SGBs are represented in grams and the value is linked to 999 purity gold.

Can I convert SGBs to physical gold?

No, SGBs cannot be converted to physical gold. These bonds are available only in digital or paper form. However, you can convert your SGBs into cash.

Why should I buy SGBs rather than physical gold?

SGBs could be a better alternative as there are no hassles of storing it. Also, investing in SGBs is comparatively cheaper than buying physical gold. You also get the added benefit of earning an interest rate of 2.50% p.a. on the principal amount with SGBs.

Can I redeem SGBs for physical gold?

No, you cannot claim physical gold when redeeming your SGBs.

Is physical gold an ideal option to meet long-term investment goals?

SGBs may be better suited for the long term as you get to earn an additional interest of 2.50% p.a. The capital gains are also tax-exempt if you hold the bonds till maturity, which is a period of 8 years.

Which is the most ideal investment option when you compare SGB vs physical gold based on liquidity?

When considering liquidity, investing in physical gold may beideal. You can sell physical gold anytime you wish. However, SGBs come with a lock-in period of 5 years.

Can I hold SGBs jointly?

Yes, you can hold Sovereign Gold Bonds jointly.

What is the value of Sovereign Gold Bonds?

The RBI issues SGBs in denominations of one gram of gold, with its value corresponding to the market value of gold with a purity of 999.

What is the maximum limit for SGB investment?

As an individual, you can subscribe to up to 4 kgs. For HUFs, the maximum limit is 4 kgs and 20 kgs for trusts and similar entities.

Bonds issued by Reserve Bank of India | Returns linked with market price of gold | Additional 2.5% interest p.a. (No TDS applicable) | Bonds tradable on exchange Invest Now
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