Gold prices are trading at record high levels amid a 41% year-to-date (YTD) rally in the yellow metal. The latest bout of buying in , which has driven it past the ₹1,10,000 mark per 10 grams in the domestic market and $3,650 in the international market, comes on the hopes of a rate cut by the US Federal Reserve Bank at its upcoming policy meeting next week.
Traders expect an 88% chance of a 25-basis-point next week and a 12% probability of a jumbo 50-bp reduction, as per CME Group’s FedWatch tool, reported Reuters. This comes after Friday’s a weak labour data in the US, suggesting job growth weakened sharply in August.
Further, the ‘s decline also supported the upward momentum in bullion prices, as a weak greenback makes gold lucrative for buyers of other currencies. Strong accumulation by central banks and geopolitical tensions continue to support bullion prices.
“From here, is expected to inch towards $4,000/oz in the short to medium term, as central bank buying, ETF allocations, and household demand converge to build higher price floors,” opined Harshal Dasani, INVAsset PMS.
Now, with a bright gold price outlook and strong demand trend for bullion already established, the question remains — How should Indian investors park funds in gold?
Should you buy SGBs amid gold price rally?
One popular option is the sovereign gold bond (SGB) scheme. SGBs are government-backed gold bonds that offer a way to invest in gold without holding it in physical form. In addition to any capital appreciation linked to the market price of gold, investors also enjoy a 2.5% interest.
While SGBs are typically issued during specific subscription windows, they can also be purchased from the secondary market via NSE and BSE. With no new SGBs likely to be issued in the foreseeable future, buying from the secondary market remains the only option for now.
The rise in gold prices has also rubbed off on the SGBs in the secondary market.
“With no new SGB issuances for a considerable period, the secondary market has become a buyers’ market, as investors look to capitalise on the limited available options. In 2025, SGB redemptions have shown remarkable returns, with older tranches from 2016-17 and 2017-18 delivering between 190% to 200%, and 2018-19 issues returning close to 200%. This strong performance has drawn significant market attention, making SGBs a lucrative investment avenue,” said Manav Modi, Analyst, Precious Metal Research, Motilal Oswal Financial Services Ltd.
However, buying SGBs from the secondary market at this juncture might not prove to be fruitful, as per analysts. The first and foremost reason is that SGBs are trading at a premium to the future market prices.
According to data from NSE, SGBs are trading at ₹11,500 per gram or upwards. Meanwhile, on MCX, gold futures are hovering near the ₹11,000 mark.
“One can buy from the secondary market if the prices of the SGB are at par with the gold price in Spot markets. At present, SGBs are trading at a premium to the gold prices; hence, buying them is not a good option,” advised Prathamesh Mallya, DVP Research – Non Agri Commodities and Currencies at Angel One.
Moreover, those who invest in SGB have to have a longer-term timeframe to enjoy the benefits of capital appreciation, interest, as well as tax benefits, Mallya added.
Additionally, Modi highlighted that investing in the secondary market comes with liquidity and flexibility risks due to limited market depth, especially in some older SGB series.
Analysts also believe that a longer timeframe makes SGBs a better bet as it would allow investors to enjoy the benefits of capital appreciation, interest as well as tax benefits.
Therefore, Modi suggested that if the remaining tenure of the SGB is substantial, it could still be taken into consideration. “Alongside SGBs, investors can explore other options like gold ETFs, mutual funds, MCX derivatives, and digital gold, depending on their risk appetite and investment horizon,” he added.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.