Digital Gold vs SGB

Diversify your investment portfolio with Sovereign Gold Bonds, combining security and potential for appreciation through government-backed gold investments.

When it comes to gold, India has one of the largest gold markets. It is the second-largest gold consumer in the world. Even though buying physical gold is the most popular and prevalent investment mode, Digital Gold and Sovereign Gold Bonds (SGBs) have been gaining popularity lately. This raises the question of Sovereign Gold Bond vs digital gold- which is better? To find out SGB vs digital gold, let us first try to understand what they are.

What is a Sovereign Gold Bond?

Sovereign Gold Bonds (SGB) are Reserve Bank of India-issued certificates against units of gold (in grams) that allow you to invest in gold bonds without having to go through the hassle of storing physical gold safely. Since gold prices are prone to market volatility, SGBs are a great form of investment. Due to the demand and popularity of gold, the price of such investments will only increase with time.

What is Digital Gold?

Digital gold is a great alternative to buying gold in the physical form. You can buy gold online with an investment amount as low as Rs.1. The gold in these schemes is 24K and is government certified. This ensures purity and removes any chances of fraud.

Sovereign Gold Bond vs Digital Gold

The table below shows you the differences between SGB vs digital gold so that you can make a wise investment decision based on this.

Parameter	Sovereign Gold Bond (SGB)	Digital Gold
Trading	Exchange-traded. They can be bought/sold only during market hours.	It is not exchange-traded. It can be bought/sold anytime online.
Lock-in period	5 years	None
Cost	Transaction and Demat account opening expenses	A on-time applicable GST of 3%
Affordability	Minimum investment of 1 gram	Investment amount as low as Rs.1
Storage	Physical gold is not involved	Digital gold involves buying/selling of physical gold stored in physical vaults.
Risk	Low-risk	High-risk
Regulation	RBI-issued	Not backed by any regulatory authority
Interest	2.5% annual interest	None
Tax	Capital gains are tax-free if held until maturity	Taxable as per income tax slab rates if held less than 36 months. LTCG of 20.8% is applicable if held for more than 36 months.

Conclusion

Digital gold as a means of investment is offered by various banks and fintech platforms and is a great alternative to investing money in gold coins or bars. If you are still investing in gold bars or coins, you miss out on a great opportunity to make more profit.

Gold bonds let you profit from the price fluctuations while also paying you interest.SGBs allow you to profit from gold stock movement while earning interest rates like fixed deposits. Both these choices are great alternatives to purchasing actual gold. Hence, whether to invest in an SGB vs digital gold ultimately depends on the investor’s financial objective and preference.

It is essential to narrow down your investment objective - whether short or long-term, whether for marriage, education, wealth creation, or retirement before investing. Remember that when you invest in gold or gold-related instruments, it should be at most 5-10 % of your investment portfolio to ensure that your investments are safe from market volatility and inflation.

What is Sovereign Gold Bond (SGB) and who issues it?

It is a government security issued by the Reserve Bank of India and is denominated in grams of gold. This scheme was introduced to provide an alternative to having physical gold.

Which is better - digital gold or SGB?

Although both digital gold and SGBs have their own advantages and disadvantages, SGBs may be a better option overall. SGBs are easy to purchase as well as redeem, you can do so online itself. SGBs are also backed by the government of India, so it’s certainly a safe investment option. Moreover, when you purchase SGBs, you will get an additional fixed interest of 2.5% on top of any market appreciation.