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Sovereign Gold Bonds’ issue open until Friday, have you invested?


Mumbai: The fourth tranche of sovereign gold bonds (SGBs) 2020-21 which opened for subscription on Monday will close on Friday (July 10), with the government fixing the issue price of the bonds at Rs 4,852 per gram during the subscription period.

The government in consultation with the Reserve Bank of India (RBI) has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 4,802 per gram of gold.

“A unique opportunity to invest in gold is presented by the Sovereign Gold Bond (SGBs), issued by the RBI on behalf of the GOI,” said Thomas, head of research – Emkay Wealth Management pointing that on the face value of the investment, the investor earns 2.50 per cent interest per annum during the term of the investment, i.e. eight years, and it also obviates the need to hold or invest in physical gold.

The investment as well as the redemption will be at the prevailing market rates relevant to the specific time periods.

“Gold prices have been moving up in the international markets in the last one year in response to the uncertainties in economic growth faced by all the major economies of the world. This situation has been further compounded by the pandemic and the resultant lockdown to combat the same,” said Thomas.

“While in all standard asset allocation models, a 5 % allocation to gold as an asset class is suggested with the intention of providing stability to the portfolio and as a hedge against inflation, a higher allocation may be contemplated based on portfolio size and other portfolio peculiarities,” he added.

A minimum of one gram can be purchased by eligible individuals and Hindu undivided families (HUFs) in a financial year. The maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUFs and 20 Kg for trusts and similar entities per fiscal year.

SGBs come with a maturity period of eight years, with an exit option after the fifth year. If an investor is eyeing an exit before the lock-in period of 5 years, they can always get out of the bonds by selling it on stock exchanges. The exit option can be utilized on interest payment dates.

Gold, which has been hovering around record high levels in India, has been one of the best performing asset class in recent times as uncertainty due to the Covid-19 pandemic triggered a flight to safe-haven assets.

The government will issue SGBs in six tranches that began in April 20 and will go on till September.

After the current tranche, in which the bonds will be issued on July 14, the sovereign gold bond scheme will open for subscription for five days each in the month of August and September.


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