The third installment (series III) of the Sovereign Gold Bond (SGB) scheme for 2021-22 has opened for subscription on Monday. The issue price for the same has been fixed at Rs 4,889 per gram of yellow metal. Online subscribers can however secure these bonds at a discount of Rs 50 per gram.
This subscription of bonds will close on June 4, the Reserve Bank of India (RBI) said.
According to Nish Bhatt, Founder and CEO of Millwood Kane International - an investment consulting firm - investment in SGB is picking up pace.
"As per data, the tranche-1 of SGB saw investment in excess of Rs 2,500 crore. The high interest was also due to lower prices of gold which reflected in the subscription price for the SGB," Bhatt said.
The advice and aim of the government, Bhatt added, that the investment should move from physical to paper gold is picking up pace.
"The subscription figures for FY21 were impressive and FY22 is likely to mirror it," he said.
Talking about the benefits of SGB, Bhatt said investment in SGB is a superior alternative to physical gold. Investment in SGB saves the cost of buying and selling the physical gold bar or coins.
Also, an investor does not have to worry about the storage of gold as it is in a demat form. Additionally, there are no local taxes that a buyer needs to pay while buying.
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.
On gold prices, Bhatt said that the rate shows promise of upside from current levels in the near future, but heavy flows in the equities may affect the rally for the yellow metal.
"As we move forward, the economic data, monetary policy, and stance by the RBI and the US Fed, any further stimulus package from India, the US, and other advanced nations will guide the gold prices along with the concerns related to the virus," he said.
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First Published: IST