Buying Sovereign Gold Bonds on Akshaya Tritiya? Make the Most of This Gold Investment

The Government of India launched Sovereign Gold Bonds (SGBs) in 2015, and since then, they have provided investors an exclusive means to latch onto gold's price uptrend while pocketing fixed returns. Storage and authenticity worries do not plague SGB investors as they do with direct gold ownership. Additionally, SGBs pay interest at an annual rate of 2.5 percent (crediting semi-annually), and they can be redeemed (along with the price appreciation) after five years, with mandatory holding till year eight for those who don't redeem early. SGBs are freely traded on the NSE and BSE.

Since fresh issuances have been halted starting FY 2024-25, the only way left for investors to get Sovereign Gold Bond (SGB) exposure is through the secondary market. So this Akshaya Tritiya, which is a day typically associated with buying gold, is the perfect occasion to discuss the all-important aspect of investing in gold via SGBs in the secondary market.

Navigating the Secondary Market: Liquidity and Pricing

More than 60 tranches of SGBs have been issued since inception, but only a few are actively traded. Some of the series, like the SGB 2023-24 Series I and III, are known for their better liquidity. Others are known to trade infrequently. As of April 2025, a number of SGBs have been found to be priced above the India Bullion and Jewellers Association (IBJA) gold reference rate. The premium is said to be driven by rising gold prices and limited supply.

Bonds that trade more actively are likely to be closer in value to the IBJA rate and hence offer better value. Conversely, if a bond is thinly traded, it might carry a premium of 10% or more which would definitely eat into any potential returns, especially if the price of gold does not move appreciably higher over the life of the bond. A good rule of thumb is to check the price of the bond against the rate that IBJA is posting before making a purchase.

Strategic Moves for Maximising SGB Returns

Individuals looking to purchase SGBs this Akshaya Tritiya can make use of these practical strategies to enhance their investment experience:  

- Put liquidity first: Actively traded series are your best bet for a smooth exit when you need one. And that helps you avoid low-volume, high-price traps that can short-circuit your returns.

- Avoid bonds priced more than 10% above the Indian Bullion Jewelers Association (IBJA) rate. Bonds above that price may not give you sufficient returns for the risk taken.

- In contrast, bonds priced at 10% or less above the IBJA rate may pay you back with a little more than the typical risk-free product. These are the bonds you want to buy.

- Align with Your Objectives: Invest in bonds that match your goals. If you're saving for retirement and expect to live primarily off your assets for 15 to 30 years, then you might choose to invest in bonds maturing in 2030 or 2031. Those bonds are long-term assets.

- Optimizing the Tax Benefits: When you hold SGBs to maturity, the gains you realize are not taxed. This is a bigger seller than any other gold investment. Even the tax in the hands of the gold bond issuer is paid at a lower rate. There are no annual tax consequences with SGBs. Thus far, SGBs seem to be on a tax honeymoon.

- Monitor Worldwide Changes: With the price of gold soaring to USD 3,100 an ounce in 2025 because of geopolitical crises and plummeting global interest rates, sovereign gold bonds continue to serve as a protective device against the twin perils of inflation and economic uncertainty.