Investors holding India's Sovereign Gold Bonds (SGBs) are realizing returns of 34% to 44% over the past year, even as spot gold prices have faced recent corrections.
The performance underscores the dual benefit of the instrument, which combines exposure to gold price movements with a fixed interest component paid by the government.
The 2-3% annual interest paid on the principal value has compounded the gains for long-term holders, offsetting periods of gold price volatility.
The strong returns come despite a pause in fresh issuances by the Indian government.
With no new tranches available, the secondary market for existing bonds has become the primary venue for trading, though liquidity remains limited compared to physical gold or ETFs.
The 2-3% annual interest paid on the principal value has compounded the gains for long-term holders, offsetting periods of gold price volatility.
However, the appeal for new investors has been tempered by recent tax policy changes.