Sovereign gold bond: price of the sovereign gold bond at the lowest in 10 months; do you have to subscribe?


NEW DELHI: Series XII of the Gold Sovereign Bond (SGB) 2020-21 program was opened for subscription on Monday. The problem comes at a time when gold prices have fallen sharply and are trading at around Rs 46,000.

Potential bidders, who intend to subscribe to the program, can bid for a minimum of 1 gram of gold at Rs 4,662 per gram. There will be a discount of Rs 50 for those who bid online. The bond issue price is the lowest for 10 months.

The issue closes on Friday March 5, while the gold bond certificate will be issued on the 9th.

“Investing in paper gold is the best and most efficient way to invest in gold. Gold should have a 5-20% allocation of any portfolio depending on risk appetite, ”said Nish Bhatt, founder and CEO of Millwood Kane International, an investment advisory firm.

If you want to subscribe, you can do so through your bank. In addition, these bonds are also sold through Stock Holding Corporation of India Limited (SHCIL), designated post offices, NSE and BSE either directly or through agents.

Investors would earn 2.50 percent interest on the amount of the initial investment, which will take effect from the date of its issuance and will be payable every six months. In addition, they can also see capital gains at the time of redemption, in case the price at the time of redemption is higher.

“Gold prices have fallen since news of an effective vaccine was reported, as it has raised hopes that the growing number of cases will be stopped and the pandemic will end soon. Gold prices fell to an 8-month low due to rising US Treasury yields, the appreciation of the dollar and the global economic recovery. Going forward, the yield of the Treasury, the movement of the dollar and the pace of the global economic recovery will drive gold prices, ”Bhatt said.

SGBs are government securities denominated in grams of gold. They replace the holding of physical gold. Investors must pay the issue price in cash and the bonds will be redeemed in cash at maturity. The bonds are issued by the RBI on behalf of the government.

The term of the obligation will be eight years with an exit option in the 5th, 6th and 7th year, to be exercised on the interest payment dates. In addition, the bonds will be tradable on the stock exchange within fifteen days of their issue.

Some of the benefits of subscribing to SGB include attractive interest with an opportunity for asset appreciation, repayment being tied to the price of gold, elimination of risk and cost of storage, exemption from capital gains tax if held to maturity and hassle-free holding as it eliminates the cost of storing physical gold.


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