Mutual Fund Wala

Gold Funds vs Sovereign Gold Bonds

Gold Funds vs Sovereign Gold Bonds Image
Basis Gold Fund Sovereign Gold Bonds
What The gold mutual fund invests in physical gold or gold-related securities, such as gold ETFs.

These funds are actively managed to follow gold price changes. Some of these schemes buy physical gold and keep it in the vaults.

SGBs are debt securities issued by the RBI on behalf of the Indian government.

They are directly tied to gold prices, providing a fixed 2.5% interest rate. However, SGB does not buy physical gold. The price is only pegged to gold.

Time Horizons They provide flexible time horizons. Investors can even exit the very next day paying some nominal exit load. SGBs have an 8-year term, but allowing early redemption after 5 years or exiting through the secondary market is another option.
Risk They are low-risk instruments, less volatile than equity schemes. Offer consistent long-term returns. SGBs are backed by the government, making them minimal-risk instruments. Only Price pegged to gold.
Returns Gold price movements influence returns. SGBs offer a fixed rate along with potential capital appreciation (appreciation in the gold price is the capital appreciation)
Taxation Taxable based on the investor’s tax slab SGBs are tax-exempt if held until maturity

Gold Funds Returns

Gold Funds Returns (P.A) (as of 9 Feb 2024)  (last 5yrs)
Invesco India Gold ETF FoF 10.65%
Axis Gold Fund 10.58%
SBI Gold Fund 10.54%
ICICI Prudential Regular Gold Savings Fund (FOF) 10.46%
HDFC Gold Fund 10.41%

Sovereign Gold Bonds Returns

Financial Year Series Issue Price (Rs) Current Price (Rs) Return of SGBs (%)
2021-22 XI 6777 5926 -12.6
2021-22 XII 6850 5926 -13.5
2022-23 I 6927 5926 -14.5
2022-23 II 7000 5926 -15.3
2022-23 III 7077 5926 -16.3

To read more about recent SGBs launched, check out Sovereign gold bond schemes in India, SGB scheme latest updates | The Economic Times