The tranche highlights the potential benefits of holding gold over the long term. However, the latest correction underlines why past returns should not be treated as a forecast of future performance.
How did SGB investors earn 366% returns?
SGB 2018-19 Series II was open for subscription from October 15 to October 19, 2018, and was issued on October 23, 2018. The issue price was ₹3,146 per gram for offline subscriptions, while investors applying online and paying digitally received a discount of ₹50 per gram, bringing the price to ₹3,096.
At the final redemption price of ₹14,425 per gram, offline subscribers earn a capital gain of ₹11,279 per gram, equivalent to around 359%. Online subscribers gain ₹11,329 per gram, or approximately 366%.
SGBs are government securities denominated in grams of gold and issued by the RBI on behalf of the Government of India. They allow investors to benefit from gold-price movements without buying or storing physical gold.
Apart from price appreciation, the bonds carry a fixed interest rate of 2.5% per annum on the initial investment, payable half-yearly. For an online investment of ₹30,960 in 10 grams, the annual interest works out to ₹774. Over eight full years, this amounts to approximately ₹6,192, subject to the actual payment schedule.
Thus, the total return comprises both the increase in gold’s value and the interest received during the holding period. Under the applicable tax rules, capital gains on redemption at maturity are exempt for individual investors, while interest income is taxable.
Why are gold and silver prices falling?
Gold of 99.9% purity declined by ₹1,000 to ₹1.48 lakh per 10 grams in Delhi on Thursday, according to the All India Sarafa Association. International spot gold fell nearly 1.7% to $4,072.30 per ounce.
Silver prices dropped ₹5,900 to ₹2,07,500 per kilogram domestically, down 48.70% from the record high of ₹4,04,500 recorded on January 29, 2026.
Rising Brent crude prices towards $112 per barrel have revived inflation concerns and strengthened expectations that central banks will keep interest rates elevated for longer. Higher interest rates tend to weigh on gold because it does not generate regular income.
Does gold still make sense for investors?
The correction does not automatically undermine gold’s role as a portfolio diversifier. Gold can provide diversification alongside equities and fixed-income investments, but it can also experience sharp price declines.
SGBs offer an additional advantage over physical gold through their fixed interest payments and the absence of storage concerns. However, investors buying existing bonds on stock exchanges must consider liquidity, market prices and the remaining maturity period. The redemption price is linked to gold prices, so capital protection against a fall in gold prices is not guaranteed.
Investors should also distinguish long-term allocation from short-term speculation. The SGB tranche demonstrates the returns possible over eight years, but investors entering at today’s prices cannot assume similar gains.
What should investors watch next?
Markets are watching the US Federal Reserve’s October 27-28 policy decision, upcoming US inflation data, crude oil prices and developments in West Asia.
For investors, the key question is not whether gold has delivered strong historical returns, but whether its role in their portfolio justifies the price risk today. Staggered investments and a measured allocation may help manage timing risk, while gold should complement — not automatically replace — equities and fixed-income assets.