Should You Redeem Sovereign Gold Bonds Early or Hold Till Maturity? Experts Explain the Smarter Move

As gold prices surge in 2025, investors holding Sovereign Gold Bonds (SGBs) are divided—should they redeem now and lock in profits, or hold till maturity for potentially greater gains? Financial experts are weighing in on when early redemption makes sense and when staying invested could be the smarter long-term strategy.

What Are Sovereign Gold Bonds (SGBs)?

Sovereign Gold Bonds are government-backed securities that allow investors to gain exposure to gold without holding it physically. The value of each bond is linked to grams of gold, and they earn a fixed 2.5% annual interest, paid semi-annually to the investor’s bank account.

The tenure of an SGB is eight years, but investors can opt for early redemption through the Reserve Bank of India (RBI) after the fifth year. This flexibility gives investors an option to exit early if they need liquidity or want to rebalance their portfolio.

When Is Early Redemption a Good Idea?

The RBI’s buyback window after five years provides a tax-free exit option. According to Thomas Stephen, Director and Head at Anand Rathi, early redemption can be beneficial “if you require funds, want to avoid selling at a discount in the secondary market, or believe gold prices may not rise further.”

If you feel gold prices are peaking or stabilizing, locking in profits now is a sensible move. Similarly, if the gold portion of your investment portfolio has grown significantly after recent rallies, a partial redemption helps restore balance.

Chirag Mehta, CIO at Quantum AMC, advises that gold should ideally comprise no more than 15% of an investment portfolio. If your exposure exceeds that, partial or early redemption makes financial sense.

NS Ramaswamy from Ventura Securities adds, “If better investment opportunities are available or liquidity is a priority, redeeming SGBs early is the right decision.”

Advantages of Holding Till Maturity

If you hold your SGBs till the full eight-year maturity, the capital gains are completely tax-free—a major advantage over most other investment products.

“You not only enjoy tax-free returns but also benefit from potential appreciation in gold prices,” says Ramaswamy. The 2.5% interest provides a steady, though taxable, income throughout the holding period.

Gold also acts as a hedge against inflation and economic uncertainty, making it a reliable asset during market volatility. As Chirag Mehta explains, “Gold remains a trusted diversification tool amid global economic risks and potential dollar weakness.”

Taxation Rules You Should Know

As per Ankit Jain, Partner at Ved Jain & Associates, SGBs redeemed through the RBI—whether after five years or at maturity—are completely exempt from capital gains tax.

However, if sold on the secondary market, the tax rules differ:

• Held for more than 12 months: Attracts 12.5% long-term capital gains tax.

• Held for less than 12 months: Short-term gains are taxed as per the investor’s income tax slab.

Thus, the mode and timing of your exit significantly affect post-tax returns.

Gold Price Outlook

Experts expect short-term volatility in gold prices. According to Ramaswamy, “The Fed’s 25-basis-point rate cut in October 2025 initially boosted gold prices, but the gains were capped after Chairman Powell’s hawkish remarks.”

He added that price swings will likely continue in the near term, suggesting a buy-on-dips strategy. Anand Rathi’s Thomas Stephen agrees that “gold demand remains strong in the long run, supported by central bank purchases and currency diversification.”

Quantum’s Chirag Mehta also sees gold as a resilient asset amid U.S. economic challenges and global market uncertainty.

What Should Investors Do?

Experts recommend tailoring your strategy based on your goals and liquidity needs:

• If you need quick liquidity: Gold ETFs are easier to sell and more flexible.

• If your goal is long-term wealth building and tax efficiency: Holding SGBs till maturity is the better choice.

For many investors, a balanced approach works best—redeeming part of their holdings to lock in tax-free profits while keeping the rest invested for long-term growth.

With gold prices near record highs, using the RBI’s buyback option for partial redemption could be a strategic move. But for those with faith in gold’s long-term potential, holding SGBs for the full eight years ensures steady returns and complete tax benefits.

Disclaimer: The views and investment tips expressed by experts are their own. Moneycontrol.com or its management is not responsible for any losses. Investors are advised to consult certified financial advisors before making any investment decisions.