What is the Gold Investment?
Gold can be held three ways, and the differences compound. Physical gold loses 8–15% immediately to making charges and carries storage risk. Gold ETFs track the price with a small expense ratio (~0.5%). Sovereign Gold Bonds track the price and pay 2.5% annual interest, with capital gains tax-free if held to the 8-year maturity.
Important: the SGB scheme is closed to fresh subscriptions. The last tranche was issued in February 2024 and the government confirmed after the 2025 Budget that it has no plans to issue more. Existing bonds still pay their coupon and still redeem tax-free at maturity, and they can be bought from other holders on the exchanges — but usually at a premium to the gold price and in thin volume, which removes much of the advantage the SGB column below shows. Treat that column as a benchmark for bonds already held, not as something you can buy at issue today.
Formula & worked example
All three follow the gold price; the differences are costs and the SGB coupon:
SGB = Amount × (1 + a)n + (Amount × 2.5% × n)
Worked example: ₹5,00,000 for 8 years at 8% appreciation. Physical (after 10% making charges) reaches about ₹8.33 lakh; an ETF about ₹8.90 lakh; an SGB reaches ₹10.25 lakh — ₹9.25 lakh of price value plus ₹1 lakh of interest. The SGB beats physical by nearly ₹1.9 lakh on identical gold.
How to use this gold investment calculator
- Enter the amount you plan to invest.
- Use a conservative appreciation rate — gold has averaged roughly 8–10% in rupees long term.
- Set making charges if you are comparing jewellery (typically 8–15%, plus GST).
- Compare the three rows to see what the wrapper alone costs you.
Smart tips
- SGBs were the best pure gold wrapper in India — 2.5% interest, no storage cost, tax-free gains at maturity — but no new tranche has been issued since February 2024, so this now applies only to bonds you already hold or buy second-hand on an exchange.
- Jewellery is consumption, not investment. Making charges are unrecoverable when you sell.
- Keep gold to 5–10% of your portfolio. It is a hedge, not a growth engine.
- Gold ETFs are the liquid choice — SGBs trade thinly on exchanges before maturity.
Frequently asked questions
Which is better: SGB, gold ETF or physical gold?
On paper SGBs win for long holds, thanks to 2.5% interest and tax-free maturity gains — but they are no longer issued, so for new money the practical choice is between a gold ETF, which wins on liquidity and cost, and physical gold, which is the weakest financially because of making charges.
Are sovereign gold bond gains tax-free?
For an individual holder, capital gains on redemption at maturity (8 years) are exempt. The 2.5% annual interest is taxable at your slab rate. Selling on an exchange before maturity is a normal taxable capital gain, not an exempt redemption.
How much gold should I hold?
Most advisers suggest 5–10% of a portfolio as a hedge against equity falls and currency weakness. Gold produces no cash flow, so a large allocation drags long-term returns.
Do making charges come back when I sell jewellery?
No. Jewellers pay for gold content only, and often deduct further for purity. Expect to lose the entire making charge plus GST.
Want the theory behind the numbers? Read our gold guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 30 Sep 2026. How we check these numbers.