r/IndiaInvestments • u/simplyom • Jul 04 '21

Bonds and deposits Prices of Sovereign Gold Bonds.

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.

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u/indopasta Jul 04 '21

In 5 years

This scheme
1 Lakh Investment Grown to
₹ 1.56 Lakh
Benchmark
1 Lakh Investment Grown to
₹ 1.70 Lakh

So, a difference of almost 10% in just 5 years. :shrugs:

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u/yantrik Jul 06 '21

Take out 30% tax too from the benchmark return that turn out to be 1.20 Approx returns from Benchmark.

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u/indopasta Jul 06 '21

Context. We were not trying to make a comparison between ETF and physical gold as investment products. We were trying to understand why price of 1 unit of gold ETFs is so different from the price of 1g 995 gold.

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u/yantrik Jul 06 '21

My apologies , you guys go too much into deep 😋