Gold ETF vs Physical Gold vs SGB: Which has given highest return on Rs 7 lakh and Rs 14 lakh investments; see calculations to know details

Gold ETF vs Physical Gold vs SGB Return Calculator: Like gold, gold investment never loses its sheen. People see it as a long-term investment, as a tool that can help them sail their boat through troubled waters, and as a reliable source that can increase their wealth.

Gold investment in modern times is not restricted to physical gold, but its digital form has also fast emerged.

Investors who don't want to keep gold in its physical form but want to take advantage of its price appreciation invest in gold exchange traded funds (ETFs) and Sovereign Gold Bonds (SGBs), also known as gold bonds.

In this write-up, we will tell you about the difference between physical gold, gold ETF, and SGB; which has been the best gold ETF and SGB in more than 6 years, and how investments of Rs 7 lakh and Rs 14 lakh, respectively, in physical gold, top gold ETF, and top SGB have evolved in over 6 years. 

Physical gold

It is the gold purchased in the form of jewellery, coins, bars, and biscuits.

The most popular form of gold investment in India, physical gold can be bought from jewellery shops, banks, and merchants.

It can be liquated for cash easily anywhere in India or abroad.

In the form of jewellery, one needs to pay making charges to the jeweller.

Since gold is expensive, one needs to protect it from being stolen.

An investor needs to pay short term capital gains for gold possession of less than 36 months, and long-term capital gains for a longer duration.

If one purchases physical gold worth more than Rs 30 lakh, they need to pay wealth tax.

Gold ETF

This is a mutual fund category. Like any other ETF, they can be bought and sold on any exchange.

They follow the price of physical gold of very high purity.

One Gold ETF unit is equal to 1 gramme of gold.

One needs to have a demat account to trade gold ETFs.

They can be traded only during trading hours.

The net asset value (NAV) price of a gold ETF fluctuates throughout the trading session. 

Sovereign Gold Bonds (SGB)

The Reserve Bank of India (RBI) issues SGBs.

SGBs are government securities denominated in grammes of gold.

Investors can buy and redeem them in cash.

While SGBs track the price of physical gold and appreciate investor wealth in the long run, they also offer a 2.50 annual interest to them. 

SGBs are issued for 8 years. However, investors get an early exit option after 5 years.

After that period, SGBs can also be traded like gold ETFs in the share market.

The minimum investment in SGBS is 1 gramme, while the maximum is 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF), and 20 kg for trusts and similar entities.

Best SGB

The top SGB in terms of performance at present is Sovereign Gold Bond Scheme 2017-18 – Series XIII 2.50%.

The SGB, issued on December 26, 2017, has given 179.1 per cent absolute returns since its inception.

The scheme will mature on December 26, 2025. 

The SGB's issue price was Rs 2,866.00, while its current price is Rs 8,000.

It has a yield of 0.89 per cent, while its coupon rate is 2.50 per cent.

The indicative price on maturity is Rs 8,698.

Best gold ETF

Since the launch date of the top SGB was December 26, 2017, we will take that as the date to count the return of the top gold ETF.

The top gold ETF from that date has been LIC Gold ETF.

It has given 14.64 per cent annualised returns (CAGR) since then. 

Physical Gold Historical Price

Gold price on December 26, 2017, was Rs 2,639.81/gramme.

Current value of Rs 7 lakh and Rs 15 lakh investments in top gold SGB

A Rs 7 lakh investment in Sovereign Gold Bond Scheme 2017-18 – Series XIII 2.50% has grown to Rs 12,53,942.77 since its launch.

A Rs 14 lakh investment in Sovereign Gold Bond Scheme 2017-18 – Series XIII 2.50% has grown to Rs 25,07,885.55 since its inception.

Current value of Rs 7 lakh and Rs 14 lakh investments in top gold ETF

At 14.64 annualised return since December 26, 2017, a Rs 7 lakh investment in the top gold ETF has turned into Rs 17,64,711.

On the other hand, a Rs 14 lakh investment in the top gold ETF has swelled to Rs 35,29,422.

Current value of Rs 7 lakh and Rs 14 lakh investments in physical gold

On December 26, 2017, one could purchase 265.17 gramme gold for Rs 7 lakh and 530.34 gramme gold for Rs 14 lakh. 

Today (October 1, 2024), the gold price is Rs 7,754/gramme, so a Rs 7 lakh investment has grown to Rs 20,58,000, while a Rs 14 lakh investment has jumped to Rs 41,16,000.