Why do SGBs trade at a premium or discount to gold?

An SGB's exchange price is whatever buyers and sellers agree, and it can sit above or below the gold it tracks because the bond carries 3 things gold does not: interest paid on the original issue price, a tax treatment that depends on the holder, and an order book that is often thin. Both directions have happened. A TradingQnA thread asks why SGBs traded 7% above gold prices (TradingQnA), and another from Apr 2025 asks why they traded below their intrinsic value (TradingQnA).

Why is the supply fixed?

The last tranche was 2023-24 Series IV in Feb 2024. At the post Budget briefing on 1st Feb 2025 the Finance Minister answered "Yes, in a way" when asked whether the scheme was being discontinued, citing its high borrowing cost (Outlook Money). A later written reply in Parliament said fresh issues were under consideration but not appropriate now (Outlook Business). The only way to buy is the secondary market: the exchange order book through any broker, or NDS-OM through RBI Retail Direct. Every buyer is bidding against an existing holder.

What moves the price apart from gold?

• Interest is paid on the issue price. A secondary buyer receives interest calculated on the price the series was issued at, not on what they paid (TradingQnA). Each series has its own issue price, so 2 series backed by the same quantity of gold pay different rupee interest, which is one reason series trade at different prices from each other (TradingQnA).
• Tax now depends on the buyer. A tax filing service replied on TradingQnA in Feb 2026 that under the Budget 2026 proposals, SGBs bought in the secondary market no longer get the capital gains exemption on redemption after 1st Apr 2026 (TradingQnA). A Jul 2026 thread describes the exemption as applying to an original holder who holds to maturity (TradingQnA). A buyer who no longer gets the exemption has less reason to pay a premium for it.
• Liquidity. Volumes vary by series, so a single large order can move the price. The TradingQnA thread on SGB pricing in the secondary market has 15,006 views (TradingQnA).
• Time left. The closer a series is to redemption, the less time a price gap has to persist, since redemption is linked to the gold price rather than to the exchange quote.

How do I check the gap on a series?

1. Note the series' last traded price and the day's traded volume on NSE or BSE.
2. Compare it with the current price of the same quantity of 999 gold.
3. Check the redemption date and the issue price, which sets the rupee interest you will receive.
4. Check whether the tax exemption at redemption would apply to you as a secondary buyer.
5. Use a limit order; a market order in a thin series can fill well away from the last price.

Retail investors ask whether there is a standard way to spot an undervalued SGB (TradingQnA). There is no single number: the gap only means something after interest, tax and liquidity are counted. This site does not say whether any series is worth buying.

What do people get wrong?

Bought on the exchange and held to maturity means tax free. That was the common belief before Budget 2026 and, as reported, no longer holds for secondary buyers. See Is an SGB bought on the exchange still tax-free at maturity?.

Selling on the exchange is taxed like redeeming with RBI. Forum replies contradict this: the exemption has only ever applied on redemption (TradingQnA).