Sovereign gold bonds open for subscription today; should you invest?

Updated : January 11, 2021 02:52 PM IST

The tenth installment (series X) of the Sovereign Gold Bond (SGB) scheme for 2020-21 opened for subscription today.

The issue price for the same has been fixed at Rs 5,104 per gram of the yellow metal.

The tenth installment (series X) of the Sovereign Gold Bond (SGB) scheme for 2020-21 opened for subscription today. The issue price for the same has been fixed at Rs 5,104 per gram of the yellow metal. Online subscribers can however secure these bonds at a discount of Rs 50 per gram.

This subscription of bonds will close on January 15, according to the Reserve Bank of India (RBI).

SGB is issued by the government, for which investors get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash.

The minimum permissible amount allowed for investment in SGB is one gram of gold. The maximum subscription limit for SGBs is 4 kgs for individuals, 4 kgs for HUF, and 20 kgs for trusts and similar entities per fiscal (April-March).

According to Nish Bhatt, Founder & CEO, Millwood Kane International, an investment consulting firm, SGB is one of the favorite routes for retail investors looking to take exposure in gold.

"There is a dual benefit in investing in SGB as investors stand to gain 2.5 percent per annum fixed interest on their investment and the rise in the value of gold once the bond is redeemed," he opines.

Additionally, with SGBs, investors are not required to worry about the storage of gold as it is in a demat form. Also, there are no local taxes that a buyer needs to pay while buying.

Talking about the performance of gold, Bhatt says that the yellow metal posted double-digit growth in 2020 and it has been trading in a range of Rs 48,000-52,000 for some time now.

"Gold has been trading sideways due to the strengthening of the dollar and higher bond yields in the US which makes buying gold expensive for international investors," he adds.

Going forward, Bhatt says, a proper handover of the regime in the US with minimum friction, additional fiscal stimulus by the incoming administration at the White House, global economic recovery, and the efficacy of the vaccination process will guide prices of gold.

People looking to invest in SGBs can do it via online banking or through their Demat accounts.

To invest through banks, customers will need to log into their net banking account. The bank page will show the SGB option (mostly in investment options). It can also be available on the bank’s home page or under services.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

Published : January 11, 2021 02:52 PM IST

Sovereign gold bonds open for subscription today; should you invest?

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