The government appears to be in a rush to redeem the sovereign gold bonds. In fact, between April and September of 2025, the government is planning about 34 redemption tranches of SGBs issued in the period between 2017 and 2020. Price of gold is already above ₹9,000 per gram, and most of the SGBs in the 2017 to 2020 period were issued in the range of ₹4,800 to ₹5,200 per gram. That will still enable the investors make a neat appreciation of nearly 100% on their SGBs, apart from interest earned. 

There are 3 strong reasons why the government is keen to redeem SGBs in a big way. Firstly, early redemption locks in the liability of the government at the current price, although it would still entail a loss on gold prices. That will be made up by the appreciation in the gold reserves of the center. Secondly, if there are still 4 years for redemption, the government saves interest for the balance period. Thirdly, the government will not lose on the tax exemption, as the investors who take premature exit, have to pay tax on capital gains. Early redemption is a triple benefit for center! 

If the investors look at it practically, an early redemption is not exactly a bad idea. Firstly, they are currently getting  SGB redemption price of over ₹9,000 per gram. While gold has been the best performing asset class in the last 10 years, there is no guarantee that this will continue. We have seen massive and volatile cycles in gold prices in the past. The last thing you would want is the price of gold falling sharply due to an economic revival. Thirdly, it is ok to remonstrate that you lose interest and the tax shield. Remember, interest at 2.5% can easily be replicated in a more lucrative avenue. Also, tax breaks add value only when there are gains. That is not too certain about next 3-4 years! 

One thumb rule of asset allocation is that gold hedges against uncertainties. That means; gold does not strictly compete with equity or debt for returns. What it does is to allocate 10% to 15% of total portfolio value to gold. That is good enough. The rule, therefore, is if the allocation of gold in the portfolio has diverged sharply from the range, then it is time to correct the imbalance. For such persons, premature redemptions also make a lot of sense. You may lose out on tax shields but win on allocation game. That should be the real driving factor when you look at whether to take up the SGB early redemption offer!