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Sovereign Gold Bonds Or Digital Gold: Which Should You Invest In?

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Investments options come in every form whether it's an investment in stock or gold. Talking about gold, there are options like Sovereign Gold Bond and Digital Gold for investments in India that work well. However, these two are good investment instruments, the complications arise when you don't know where should you invest? And which one is safe to invest?

 

What is Sovereign Gold Bond?
 

What is Sovereign Gold Bond?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams, according to the Reserve Bank of India (RBI). They aren't meant to be used in place of physical gold like Jewellery, or Gold Bar. The bond is issued on behalf of the government of India by the RBI. The Bonds are issued in one-gram gold quantities and multiples thereafter. The minimum investment in the Bond is one gram, with a maximum subscription limit of 4 kilograms (KG) for individuals, four kilograms for HUF (Hindu Undivided Families), and 20 kilograms for trusts and similar entities as determined by the government of India from time to time per fiscal year.

Bonds can be purchased directly or via agents from Scheduled Private Banks, designated Post Offices, Scheduled Foreign Banks, Nationalised Banks, Stock Holding Corporation of India Ltd. (SHCIL), and licensed stock exchanges. According to an RBI notification, the issuance price for the SGB Scheme 2021-22 has been set at Rs 4,791 per gram.

The maturity Period

Sovereign bonds are limited in their use and must be kept for at least five years. Even after the five-year period has passed, the bonds will not maturity for another eight years. Transaction expenses are high when selling before maturity. In one of the world's most liquid and actively traded marketplaces, digital gold may be accessible at any time with no additional expenses.

What is Digital gold?

What is Digital gold?

Digital gold is a virtual way to acquire and invest in gold without really holding it. It is available for purchase on the internet. Buying digital gold allows you to store 24K gold digitally without the need for a safe or bank vault. And one rupee is the minimum purchase or sale price. Digital gold is purchased online and held by the seller on behalf of the buyer in insured vaults. However, there is a concern that there would be no regulatory monitoring from an agency like RBI or the Security Exchange Board of India (SEBI). Investors may buy digital gold via Demat Account, Phonepe, and Paytm, or among other options. It's important to keep in mind that actual digital gold is completely depleted. It is genuine gold, not a depiction of the returns on gold. A gold bar or a piece of a gold bar is owned by an investor.

Which one should you buy?

Which one should you buy?

Trading businesses buy an equivalent quantity of real gold in your name and keep it in secure vaults after you invest in digital gold. For the convenience of their consumers, numerous E-wallets, brokers, and fintech organizations' platforms have tie-ups with any of these three licensed Digi Gold players. If you invest in gold coins and bars, you're squandering a fantastic opportunity to make a lot of money. There are gold bonds on the market that allow you to profit from price fluctuations while still paying a set interest rate, similar to bank fixed deposits. A sovereign gold bond is a low-cost, high-quality alternative to purchasing actual gold. The buying decision is purely a personal opinion. The investor should understand all the basics of both the investment options and make his or her choice accordingly.

Story first published: Saturday, January 8, 2022, 19:28 [IST]
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