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Market Intelligence › Basic Terminologies
The structure of an SGB, its tenure, and how it differs from physical gold
Published by The Retail Trader · JUL 30, 2026 · AIF, PE & Alternates
An SGB is a government security whose value is linked to the price of gold. You do not hold gold, but your return moves with gold — and on top of that you also get a small interest.
The issue price is linked to the prevailing price of gold. At maturity you are paid according to the gold price at that time, and in between you receive interest at a fixed rate.
Because it is not physical gold, there are no making charges, no question of purity, and no locker cost.
An SGB has its own constraints:
• Its tenure is long, and early exit has its own windows.
• Even though it trades on the exchange, liquidity is often thin.
• In the secondary market the price can differ from the issue price.
• The tax treatment of the interest and the treatment at maturity are different.
Gold is a diversifier in a portfolio, not a growth engine. Its job is to work in the periods when equity is not working — so its allocation should be decided in advance, not by looking at its recent returns.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed by the exchanges, SEBI and RBI from time to time, so verify every number yourself with your broker or the official source.