MODERN VS. TRADITIONAL GOLD INVESTMENTS IN INDIA

Abstract

Sovereign Gold Bonds (SGBs) have gained popularity in India as a secure, government-backed investment alternative to physical gold and Gold Exchange-Traded Funds (ETFs). While all three options—SGBs, Gold ETFs, and physical gold—serve the same fundamental purpose of providing exposure to gold, they differ significantly in terms of structure, returns, risks, costs, and liquidity. This study evaluates the comparative performance of SGBs, physical gold, and Gold ETFs in terms of returns, volatility, and risk-adjusted metrics. Using historical data from 2015—the year SGBs were introduced—to the present, this research examines annualized returns, volatility (measured by standard deviation), and Sharpe ratios for these investment options. The study aims to assess whether SGBs offer superior financial benefits over traditional gold investments by considering factors such as capital appreciation, periodic interest payments, and tax advantages. Additionally, it explores the role of Gold ETFs as a liquid and accessible investment alternative. The research methodology involves statistical analysis of market performance data to identify trends and risk-return trade-offs. Findings indicate that SGBs provide competitive returns compared to physical gold, while also offering additional advantages such as exemption from capital gains tax upon maturity. These insights can guide investors in making informed portfolio decisions based on their risk tolerance and investment objectives. The study underscores SGBs’ potential as a strategic investment option within a diversified financial portfolio.