Gold made a strong run in 2024–2025, partly on safe-haven flows around geopolitical tension and partly because central banks (especially Indian, Chinese, and Polish) bought meaningfully. Indian retail investors who held SGBs benefitted twice — from the price rise and from the 2.5% annual coupon.
The catch in May 2026: the government has not issued new SGBs since 2024, and signals suggest the program is paused indefinitely. So the question isn't "should I buy the new tranche" — it's "what do I do with my existing SGBs, and what replaces SGBs for new allocation?"
What changed in 2026
- No SGB issuances in FY25 or FY26 yet. Government cited the fiscal cost of the embedded interest plus capital appreciation as the reason.
- Existing SGBs trade on NSE/BSE at ₹/gram prices, sometimes below NAV (the prevailing gold reference price) due to thin liquidity.
- Tax treatment unchanged: capital gains on redemption at maturity (8 years) are tax-free; interim sales taxed at 12.5% LTCG with indexation.
How SGB works (brief refresher)
- 1 SGB unit = 1 gram of gold (price-linked)
- 2.5% coupon per annum on issue price, paid semi-annually
- 8-year tenure; early redemption permitted from year 5
- Capital gains tax-free at maturity; LTCG/STCG if sold earlier on exchange
- Held in demat or physical certificate
The secondary-market opportunity
Because new SGB supply has stopped, existing SGBs trade on NSE/BSE based on remaining tenure and the time-to-maturity tax shield. SGBs maturing in the next 1–3 years sometimes trade at a 1–2% discount to NAV due to low liquidity. For someone with a clear gold allocation target, picking these up gives:
- The 2.5% coupon for the remaining period
- The tax-free maturity at face value (which equals the gold price at that point)
- A small discount to NAV at entry
The trade-off: liquidity is shallow, so don't size large. Volume is sometimes 1–2k units per series per day.
SGB vs gold ETF vs physical
| Format |
Cost / drag |
Liquidity |
Tax |
Coupon |
| SGB |
None |
Low (secondary market) |
Tax-free at 8-yr maturity; LTCG 12.5% if sold |
2.5% p.a. |
| Gold ETF (e.g., HDFC, ICICI) |
0.5–0.7% TER |
High (intraday) |
LTCG 12.5% above ₹1.25L |
None |
| Gold mutual fund |
0.7–1.0% TER |
High (NAV-based) |
Same as ETF |
None |
| Physical gold (24K) |
8–25% making + GST |
Medium (resale) |
LTCG 12.5% with indexation |
None |
| Digital gold (e.g., MMTC, SafeGold) |
3–5% spread |
High |
Same as physical |
None |
For new allocation in 2026, gold ETF is the cleanest. Pick ones with the lowest tracking error and tightest spreads — HDFC Gold ETF and ICICI Prudential Gold ETF are the usual top picks.
How much gold should be in a portfolio
Most academic work suggests 5–10% gold for an Indian rupee-denominated portfolio, partly as inflation hedge and partly as currency hedge. Some advisors push for 15% during macro uncertainty — defensible but not universal.
If you're holding 25%+ in gold, you've shifted from "diversifier" to "directional bet." That's fine if it's deliberate, but treat it as the call it is.
FAQ
Are new SGB tranches coming back?
Unclear. The fiscal cost is real (the government effectively guaranteed gold-linked returns plus 2.5% coupon plus tax-free maturity). Most market commentary expects either a redesigned, less generous version, or a continued pause.
Can I redeem SGB before 8 years?
Yes — early redemption permitted from year 5 onwards on RBI's interest-payment dates. Or sell on NSE/BSE anytime. Tax differs (LTCG vs tax-free at maturity).
Is digital gold safe?
Custody-wise, regulated providers (MMTC-PAMP, SafeGold) hold allocated bullion. The drag is the spread — buying and selling can cost 3–5% combined. For a long-term position, ETF is cleaner.
Where to go next
For related guides see Best mutual funds in India 2026, Asset allocation by age in 2026, and PPF vs ELSS vs NPS in 2026.