Gold is a popular consideration when diversifying your investment portfolio, as it adds value in many forms. In fact, expert advisors suggest investing at least 10-20% in gold assets. This does depend on your risk appetite. 


While this precious metal acts as a perfect hedge against inflation, investing in gold also helps you tackle currency risk. Best of all, there are many forms of gold to invest in. Two of the most popular variants, besides physical gold, include:

  • Gold Exchange Traded Funds (ETFs)

  • Sovereign Gold Bonds (SGBs)


With increasing prices of physical gold, it may be wise to consider these alternatives.

Sovereign Gold Bond vs Physical Gold: Key Differences

Amongst various investment avenues, investing in gold assets has emotional and social relevance in India. With features like easy availability and faster liquidity, gold is known to help investors sail through a financial crisis.


While you can easily purchase it from any jeweller, there is no limit to buying gold. However, remember to keep your gold invoices intact, as that may help you during income tax filing.


See the table to understand the key difference between SGBs and physical gold.


Physical Gold

Sovereign Gold Bonds


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

Available in digitised and paper formats


Volatile prices that can fluctuate depending on the economic climate

Fixed by the Government of India based on the latest market rates

Investment Window

No fixed investment timeline

RBI announces the subscription window


Easy to liquidate

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

Lock-in Duration


5 years

Interest Rate


2.50% p.a., with interest earnings paid half-yearly

Demat Account


It is not compulsory to open a Demat account. However, you can hold your SGB units in a Demat account if you have one

Risk Factor

High risk of physical gold being stolen or misplaced

Nil as there is no threat of SGB being stolen


While there are many pros to investing in Sovereign Gold Bonds, physical gold investments also have their share of advantages. For example, it is easy to liquidate physical gold during emergencies, as mentioned.


Moreover, owning physical gold provides you with complete control. This means you can decide when to sell or buy the physical gold. Whatever investment option you choose among SGB vs physical gold, analyse all the pros and cons before investing.

Explore Diverse Investment Opportunities for Financial Prosperity

1. Is it Better to Buy Physical Gold or Digital Gold?

Digital gold is an electronic form of gold that can be purchased, held, and traded. You will not be required to physically possess gold. This is a convenient and accessible way to hold gold without the hassle of having to store it safely. 

On the other hand, with physical gold, you will need to purchase and store gold in its physical form. Naturally, you may be wondering, which is better? This depends on a number of factors, such as your financial goals, risk tolerance, investment horizon, etc. 

Outlined below are a few factors that you should consider before making an investment in digital or physical gold: 

  • Cost 

One of the most important things to consider while making any investment is the associated costs. Keeping costs low will help you make the most of your investments. Digital gold has much lower transaction fees when compared to physical gold. 


Digital gold might be a better option for you if you want to keep costs low, particularly if you are making a fairly large investment.

  • Safety 

Digital gold is stored in a safe and secure vault. So, you do not have to worry about the risk of it getting stolen or lost. With physical gold, storage can be a hassle, and there is always a chance of it getting stolen or lost.

  • Redemption 

Redeeming your digital gold is very simple and can be done entirely online. However, this is not the case with physical gold. Redeeming your physical gold means selling it, and this is not always this simple. It can be a lengthy and time-consuming process.

  • Track Your Investments 

It is now easier than ever to keep track of your investments in the case of digital gold. You can stay on top of your digital gold investments with online platforms. However, keeping track of your physical gold investments is not always quite this simple. 


So, if you prefer tracking your investments, then consider investing in digital gold.

  • Investment Goals 

Everybody’s financial situation and investment goals are different. If you are looking to hold your investment for an extended period of time, then you may consider making some investments in physical gold as well as digital gold.


Although digital gold is very safe, it is still important to remember that digital gold is a paper asset that represents a claim. This means that you do not actually hold gold; the custodian does. 


In times of economic uncertainty, physical gold being a tangible asset can prove to be more useful than digital gold. Weighing the pros and cons of both investment options can help you make informed investment decisions. 


Before investing in SGB or physical gold, consider your financial objectives and long-term goals. Get more details about various investment options on Bajaj Markets and start diversifying your investment portfolio.

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FAQs on SGB Vs Physical Gold

No. While SGBs are represented in grams and the value is linked to 999 purity gold, they are not backed by 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. 

The price of SGBs appreciates when the rate of gold increases and there are no hassles of storing it, unlike physical gold. 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 when you buy SGBs.

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

When planning for long-term investments, opting for SGBs is a better option. This is because you get to earn an additional 2.50% p.a. interest rate on these bonds. 

When considering the liquidity factor, investing in physical gold is ideal. This is because you can sell your physical gold anytime you wish. However, this is not so in the case of SGBs, as they come in with a lock-in period of at least 5 years. 


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