The Sovereign Gold Bond Scheme (SGBS) was launched in 2015 and has become extremely popular in the last few years. In the SGBS, the bonds are issued in terms of equivalent units of gold measured in grams. The quantum of gold remains the same and the value of the gold bonds go up or go down based on price of gold. In addition, the SGBS also pays interest of 2.5% per annum, which is what makes it attractive to a lot of investors. SGBS also can be free of capital gains if you hold the SGBS till maturity and redeem after the completion of the stipulated period of 8 years. That is what makes SGBS special. In fact, SGBS is just like buying gold with the only difference being that you hold the gold in either paper form or in the demat form.

The Gold Monetization Scheme (GMS) is a scheme to help families monetize gold in the household in any form; be it bars, gold coins or even jewellery. But GMS will entail a change of form. You can hold GMS bonds in jewellery form but it can only be held in the form of gold securities. Basically, it dematerializes your gold holdings. Gold holders are able to convert their gold jewellery into an investment and Indian economy does not have to import so much gold. However, when it was first launched in 2015, households were not too comfortable with the idea of converting their family heirloom jewellery into paper form. That is why it did not take off. Most families prefer to pledge the gold to banks and take loans against them when they need money. Government is now planning to launch a modified GSM which will be more attractive to investors.