Benefits, Risks & Expert Insights for Smart Investors

Sovereign gold Bonds (SGBs) have become one of India’s most preferred gold investment options — combining the security of government backing with the returns of gold price appreciation. While new SGB tranches are released only a few times a year, investors can still buy them any time through the secondary market.

Here’s a complete guide on how it works, why it can be profitable, and what risks to watch out for.

🔄 What Are SGBs Available in the Secondary Market?

Once SGBs are issued by the government of India, they are listed and traded on:

· NSE (National Stock Exchange)

· BSE (Bombay Stock Exchange)

This allows investors to buy and sell SGB units like shares, depending on demand and price movements.

🛒 How to Buy SGBs in the Secondary Market

Buying SGBs in the secondary market is simple and can be done in minutes:

1️⃣ Open a Demat & Trading Account

If you already invest in stocks, you can use the same account.

2️⃣ Search for SGB Series

Each SGB tranche has a unique code, such as:

· SGB 2021-22 Series V

· SGB 2019-20 Series II, etc.

3️⃣ Check Price, Liquidity & Bid/Ask Spread

Secondary market prices often differ from RBI issue prices.

4️⃣ Place an Order Like a Stock

Choose the number of units (1 unit = 1 gram of gold) and execute the trade.

5️⃣ Bonds Will Reflect in Your Demat

You will continue to earn 2.5% annual interest (credited directly to your bank).

💰 Why Investors Prefer SGBs in the Secondary Market

Unlike fresh issues, secondary market SGBs offer special opportunities:

✔️ 1. Buy at a Discount

Often, SGBs trade below their intrinsic gold value, allowing you to buy gold cheaper than market price.

✔️ 2. Same Benefits at Lower Cost

Even if bought cheaper, you still get:

· 2.5% annual interest

· capital gains tax exemption (on maturity after 8 years)

✔️ 3. Flexible Entry Anytime

No need to wait for new RBI issuance windows.

✔️ 4. Higher Returns Compared to Physical Gold

Gold price appreciation + interest + zero making charges.

⚠️ Risks You Should Know Before Buying

Although SGBs are safe, secondary market buying has some risks:

❗ 1. Low Liquidity

Some series have very few buyers or sellers, making it difficult to trade.

❗ 2. Large Bid-Ask Spread

You may have to pay a higher price to buy or accept a lower price to sell.

❗ 3. Price Volatility

Since prices depend on gold rates + market sentiment, they may fluctuate more.

❗ 4. Less Attractive for Short-Term Traders

SGBs shine for 5–8 year holding, not for weekly or monthly trading.

🧠 Expert Insights: Should You Buy in the Secondary Market?

Financial experts suggest:

⭐ Best time to buy:

· When secondary market prices fall 3–8% below spot gold

· When gold dips temporarily due to global factors

⭐ Best type of investor:

Long-term investors looking for:

· Low-risk growth

· Tax-efficient returns

· Protection against inflation

· Diversification from equity

⭐ Best strategy:

· Compare multiple SGB series

· Choose the ones trading at the deepest discount

· Hold till maturity for tax-free gains

📌 Final Takeaway

Sovereign gold Bonds purchased in the secondary market can offer exceptional value, especially when they trade at a discount. You get:

· Government-backed safety

· Annual interest

· Tax-free maturity gains

· Affordable purchase opportunities

However, investors must consider liquidity, pricing gaps, and long-term commitment.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.