Gold ETFs Review: The Practical Way to Hold Gold Now That SGBs Are Paused
Pros
- Open to new investment any time, unlike paused SGBs
- No storage, locker, or purity concerns of physical gold
- Trades on the exchange with reasonable liquidity
- Good portfolio diversifier against equity volatility
Cons
- No extra interest, unlike SGBs' 2.5% annual bonus
- Gains are taxable, unlike SGB's tax-free maturity benefit
- Requires a demat/trading account to invest
- Tracks gold price only -- no fixed income component
The SGB context
Sovereign Gold Bonds were long the preferred paper-gold instrument thanks to a 2.5% annual interest bonus and tax-free capital gains at maturity, but the government has not opened a new SGB tranche since February 2024 and confirmed in the Union Budget 2025 session that no fresh issuance is planned -- existing SGBs can still be bought/sold on stock exchanges, but the primary issuance route is closed.
Why Gold ETFs fill the gap
Gold ETFs track the market price of gold, trade on stock exchanges like a stock, and require no locker or storage risk. They lack the SGB's extra interest and tax-free maturity benefit, but remain open to new investment at any time through a regular demat account.
Portfolio role
Most advisors suggest a modest 5-10% portfolio allocation to gold as a diversifier -- it tends to hold up or rise when equities fall, reducing overall portfolio correlation and volatility rather than serving as a primary growth engine.
Bottom line
The sensible default for new gold exposure today, given SGBs are effectively closed to new investors. Existing SGB holders should note that some tranches are becoming eligible for premature redemption, and Budget 2026 changed SGB capital gains taxation -- worth checking before deciding to hold or redeem.
SGB and Gold ETF status verified against RBI, government, and comparison-platform data as of mid-2026 -- policy on new SGB issuance and tax treatment can change; confirm the current status before publishing.
