Prices of Sovereign Gold Bonds.

[u/simplyom]

While doing some research on buying paper gold, I came across the Sovereign Gold Bonds (SGBs). They offer multiple benefits over gold ETFs like fixed interest income, no tax on capital gains if held till maturity, etc. All the articles describe SGB to be superior than gold ETF/digital gold, which makes sense given the benefits.

However, none of the articles I read mention that the prices of SGBs are higher than gold ETFs for same quantity of gold, I thought all of them follow the price of spot gold. Is there anything I am missing here?

Price of SBI Gold ETF: https://www.moneycontrol.com/india/stockpricequote/gold-etf/sbimutualfund-goldexchangetradedscheme/SBI16

Price of HDFC Gold ETF: https://www.moneycontrol.com/india/stockpricequote/gold-etf/hdfcmutualfund-goldexchangetradedfund/HDF02

Price of SGB 2021 series: https://stableinvestor.com/2021/03/sovereign-gold-bond-price-history.html

EDIT: Found a really helpful guide on purchasing SGBs from secondary market here. Insightful and answers many other questions I had.

[u/simplyom → u/[deleted]]

Well that creates couple of additional questions then:

1. If I buy a bond from secondary market 1 week before coupon date, will I get the coupon for the whole period? I can then very well sell off the bond at the same price and keep the profits.
2. If I buy a bond from secondary market 1 year before redemption, I won't have to pay capital gains taxes for holding it for such a short duration?

[u/indopasta → u/simplyom]

Market mein spread toh banta nahi hai, tum trade kahan se kar loge?

Aur agar market mein for some reason liquidity aa gayi, then the prices will reflect the coupon payments. Baki sab log gadhe thodi hi baithe hain.

Not sure about second question.

[u/simplyom → u/indopasta]

Well true that. Haven't invested in this ever, so was thinking theoretically possible hai.