In a surprising turn of events, the Government of India (GoI) has been labeled the “biggest short seller” in gold, following massive losses incurred through the Sovereign Gold Bond (SGB) scheme. 

Over the past decade, gold prices have skyrocketed from ₹2,684 per gram in 2015 to over ₹7,800 per gram in 2025, making SGBs a lucrative investment for buyers but a costly endeavor for the government.

The Short-Selling Allegations

One Shankar Sharma recently ignited the debate on X (formerly Twitter), questioning the very foundation of the SGB program. He speculated whether the scheme was, in essence, a “Dabba trade” with no actual gold backing. 

The response from Arkabrata Das further fueled the discussion, explaining how the GoI effectively took a short position on gold through the SGB scheme.

“The government sold bonds linked to gold at a fixed rate while paying an annual interest of 2.5%. With gold prices tripling over ten years, the scheme resulted in a staggering loss of approximately ₹38,700 crore,” Das explained.

SEBI’s Role and Public Sentiment

Some social media users even went as far as suggesting that the Securities and Exchange Board of India (SEBI) should impose restrictions on the GoI, given the significant losses. However, regulatory experts were quick to dismiss the idea, clarifying that SEBI does not regulate government policies, which fall under the purview of the Reserve Bank of India (RBI) and the Finance Ministry.

Winners and Losers

Investor sentiment on the issue is divided. While some criticize the government’s handling of the scheme, others argue that SGBs were an intelligent way to shift investor interest from physical gold to paper assets. Market commentator Ruchir Goyal summed it up bluntly: “Idiots were those who still opted for physical gold instead of SGB. People who purchased SGBs earned a lot, while the government took the hit.”

A Costly Experiment?

The original intent of the SGB program was to reduce India’s dependence on physical gold imports and provide an attractive, interest-bearing alternative to gold ownership. However, the steep rise in gold prices turned it into an expensive miscalculation for the government.

With the losses mounting, the question now is whether the GoI will reconsider or tweak its approach to sovereign gold investments in the future. One thing is certain—investors who bet on SGBs reaped significant gains, while the government found itself on the losing side of the trade.