A comparison of a Rs 5 lakh investment over five years shows how both instruments performed and which one came out ahead.

What are gold ETFs?

A Gold ETF is a fund that invests in physical gold and is listed on a stock exchange. When you purchase a Gold ETF, you become the owner of a paper-based representation of that physical gold, which is held in secure vaults by custodian banks.

Top Gold ETFs - Nippon India ETF Gold BeES, HDFC Gold ETF, SBI Gold ETF, ICICI Prudential Gold ETF.

What is the minimum investment in a gold ETF?

As low as Rs 50-100 (fractional units)

These ETFs are traded on NSE and BSE (real-time trading). The storage charge built into the expense ratio is 0.5 per cent a year. It has no making charge and no purity risk.

What are Sovereign Gold Bonds (SGBs)?

SGBs are government bonds issued by the RBI, denominated in grams of gold. When you invest in an SGB, you lend money to the government at the prevailing market price of gold; and upon maturity, the government returns your investment -- along with any appreciation in the price of gold -- plus an annual interest of 2.5 per cent.

SGB has 8 years of tenure (premature redemption after 5 years). It has a 2.5 per cent annual interest on the issue price. You can purchase a maximum of 4 kg per person/financial year. It is available through banks, post offices, and stock exchanges (after listing).

What is the new issue status in 2026?

Government has paused fresh SGB issuances so far.

Gold ETF returns

Gold ETFs primarily mirror gold price movement, minus a small expense ratio.
Investment - Rs 5,00,000
Estimated gain in 5 year - Rs 4,98,350
Final value - Rs 9.98 lakh
Total return - 100 per cent

SGB returns

SGBs offer an annual interest rate of 2.5 per cent. This additional return significantly boosts the overall profit.
5 lakh investment - Rs 14.2 lakh in 5 years
Total return - 184 per cent

Why did SGB outperform?

SGBs provide fixed annual interest.
Gold ETFs charge - 0.3 to 0.5 per cent annually, reducing net returns.
SGB: Capital gains tax-free at maturity.
ETF: 12.5 per cent LTCG tax applicable

Frequently Asked Questions (FAQs)

Are SGBs available for purchase in 2026?

The Government has paused fresh SGB issuances as of recent periods. Check RBI's website or your bank for the latest issuance schedule. Existing SGB series continue to trade on stock exchanges.

Are Gold ETF gains taxable?

Yes. Gold ETF gains held less than 24 months are taxed at income slab rates (short-term). Gains held more than 24 months are taxed at 12.5% (long-term capital gains) without indexation.

Are SGB capital gains tax-free?

Yes, for resident individual investors, capital gains arising at SGB maturity (8 years) are completely exempt from capital gains tax. Interest received is taxable as income.

Can NRIs invest in SGBs?

RBI has restricted fresh SGB purchases for NRIs. NRIs who acquired SGBs while resident can continue to hold them. Check current RBI circular for latest rules.

What is the 2.5% SGB interest calculated on?

The 2.5% p.a. interest is calculated on the issue price (price at which you bought the SGB), not the current market price of gold. It's paid semi-annually directly to your bank account.

Is Gold ETF better than SGB for short-term investors?

Yes. If you need flexibility to sell before 5 years, Gold ETF is better as it can be traded anytime. SGB premature exit before 5 years is not available.

Which Gold ETF has the best track record in India?

Nippon India ETF Gold BeES is the oldest and most liquid. HDFC Gold ETF and SBI Gold ETF are also excellent with minimal tracking error. All closely mirror gold prices the difference between them is minimal.

Is it better to buy gold ETF or gold fund of fund?

Gold ETF is cheaper (lower expense ratio) but requires a Demat account. Gold FoF is slightly more expensive but accessible without Demat through regular SIP. Choose based on your infrastructure.

What is the maximum SGB investment limit?

Individuals can buy maximum 4 kg worth of SGBs per financial year. Hindu Undivided Families (HUFs) and trusts have different limits.

Should I buy existing SGB series from secondary market or wait for new issuance?

If secondary market SGBs are trading at a discount to the current gold NAV, buying from secondary market can be advantageous. In 2026, with SGB issuances paused, secondary market is the primary way to access SGBs.

Also Read | SIP Calculation: How Rs 1,000 to Rs 1 lakh monthly SIPs can turn into big corpus in 10 years - See 10-15% return impact

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)

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