What Are Gold Bonds? and How you can invest in them?

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Gold bonds are debt securities issued by the government that are linked to the market value of gold. These bonds offer a fixed interest rate, and the principal value is linked to the current market price of gold. Gold bonds are a popular investment option for individuals looking to diversify their portfolios and protect against inflation.

Types of Gold Bonds

The Indian government offers different gold bond schemes, including the Sovereign Gold Bond (SGB) and the Gold Monetization Scheme (GMS).

Sovereign Gold Bond (SGB)

The SGB is a government-issued bond that is linked to the price of gold. The bonds offer a fixed interest rate and the opportunity to earn capital gains if the price of gold increases. The minimum investment in SGB is one gram of gold, and the bonds have a tenure of eight years. The interest rate is fixed at the time of investment and paid annually.

Gold Monetization Scheme (GMS)

The GMS is a scheme that allows individuals to deposit gold and earn interest on it. The deposited gold is refined, and the depositors can choose to receive either cash or gold after the maturity of the deposit. The minimum deposit in the GMS is 10 grams of gold.

Riks and advantages associated with Gold bonds

There are quite a few advantages when it comes to investing in gold bonds, but as with any other financial instrument, there are also risks involved. We have created a shortlist on the various risks and advantages the different types of gold bonds have to offer:

Sovereign Gold Bonds (SGBs):


  • Offer an interest rate of 2.5% p.a. payable semi-annually on the nominal value
  • Can be held in demat form, eliminating the need for physical storage
  • Can be used as collateral for loans
  • Long-term investment option for capital appreciation


  • Market fluctuations can affect the returns
  • Interest rate may not be sufficient to offset inflation

Gold Monetization Scheme (GMS):


  • Offers guaranteed returns based on the prevailing gold price
  • Short-term investment option with tenures ranging from 1-3 years
  • Can be used to earn interest or get gold in physical form after maturity
  • No storage costs as the gold is held by the government


  • Low returns compared to other investment options
  • The interest rate may not be sufficient to offset inflation

How to Invest in Gold Bonds

Investing in gold bonds is a straightforward process. Here’s a step-by-step guide on how to invest in gold bonds:

  1. Research and choose the type of gold bond you want to invest in. This can be sovereign gold bonds, gold ETFs, or other types of gold bonds.
  2. Find a reputable broker or financial institution that offers gold bonds. Some popular options include Vanguard, iShares, and SPDR Gold Shares.
  3. Open an investment account with the chosen broker or financial institution. This will typically involve filling out an application and providing identification and banking information.
  4. Fund your investment account with the desired amount of money you want to invest in gold bonds.
  5. Search for the specific gold bond you want to invest in using the broker’s or financial institution’s search function.
  6. Once you have found the gold bond, enter the amount you want to invest and follow the prompts to complete the transaction.
  7. Monitor your investment regularly and make any necessary adjustments based on market conditions and your investment goals.

It’s important to note that the process of investing in gold bonds may vary depending on the broker or financial institution you choose.

It’s always a good idea to do thorough research and understand the fees, risks, and advantages associated with each investment option before making a decision.

Which Is the Best Gold Bond to Invest In?

The choice of the best gold bond to invest in depends on your investment goals and risk appetite. The SGB is a good option for investors who want to earn a fixed interest rate and participate in any appreciation in the price of gold. On the other hand, the GMS is a good option for investors who want to earn interest on their gold holdings.

How to Invest in Gold for Beginners?

Investing in gold for beginners can seem daunting, but it is a straightforward process. Here are some tips for beginners who want to invest in gold:

  1. Understand the different forms of gold investment: Gold can be bought in various forms such as physical gold, gold ETFs and stocks, and gold mutual funds. Understand the pros and cons of each form before investing.
  2. Determine your investment goals: Determine why you want to invest in gold. Whether it’s for diversification, protection against inflation, or capital gains, understanding your investment goals will help you make better investment decisions.
  1. Research the market: Research the current market trends, prices, and economic indicators that affect the price of gold. This will help you make informed investment decisions.
  2. Start small: As a beginner, it’s best to start small and gradually increase your investment as you gain experience and confidence in the market.
  3. Choose the right investment option: Choose the right investment option based on your investment goals and risk appetite. Consider factors such as liquidity, storage costs, and tax implications.

How can I invest in Gold Bonds in India?

Investing in gold bonds online is a convenient option for investors who want to avoid the hassle of physical paperwork. Here’s how you can invest in gold bonds online:

  1. Open a demat account: To invest in gold bonds online, you need to have a demat account. You can open a demat account with any registered depository participant.
  2. Choose the right gold bond: Choose the right gold bond based on your investment goals and risk appetite.
  3. Log in to the online platform: Log in to the online platform of the registered depository participant through which you want to invest in gold bonds.
  4. Fill in the application form: Fill in the online application form with the required details such as the amount of investment, payment mode, and bank details.
  5. Make the payment: Make the payment through online transfer or net banking.
  6. Hold the gold bond: Once you have invested in the gold bond, you can hold it in your demat account until maturity.

How Profitable is it to invest in Gold Bonds?

The profitability of gold bonds depends on the market price of gold. If the price of gold increases, investors can earn capital gains in addition to the fixed interest rate offered by the bonds. However, if the price of gold decreases, investors can suffer losses.

How and Where to Buy Gold Bonds?

Gold bonds can be purchased from scheduled commercial banks, Stock Holding Corporation of India, designated post offices, and recognized stock exchanges such as NSE and BSE, NYSE. You can make the payment through cash, cheque, or online transfer.

What Is the Minimum Investment in Gold Bonds?

The minimum investment in gold bond is one gram of gold for the SGB and 10 grams of gold for the GMS. The price of the gold bond is based on the current market price of gold.

Taxes for gold bonds

When it comes to investing in gold bonds, it’s important to consider factors such as liquidity, storage costs, and tax implications. Choosing the right investment option that aligns with your investment goals and risk appetite can help you maximize your returns and minimize your risks.

Bottom Line

In conclusion, investing in gold bonds can be a good option for investors looking to diversify their portfolio and protect against inflation.

Understanding the different types of gold bonds, how they work, and where to buy them is crucial before investing.

As with any investment, it’s important to do your research, set realistic investment goals, and start small before gradually increasing your investment.

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