Sovereign Gold Bond In India

sovereign gold Bond india

 In India all house have a dream of buying lots of gold, jewelry for their children wedding, and used on dress, saree which give shine.

But in now days gold price are increasing day by day. Common people not able to get gold jewelry because of price rise. Salary not increasing to beat the inflation.

Some people want gold but don’t want physical gold because of storage problem also fear of theft. For this there is one option available in the market that is Sovereign Gold Bond.

To understand this lets look in full depth of this bond.

What is Sovereign Gold Bond

Sovereign Gold Bond is bond issue by RBI on behalf of the  government of India. It is not a physical gold. It is certificate that is issue by RBI. If you have this certificate then it is mean that you purchase a gold which is not physical but you can sell that gold after some time of period.

How to  buy Sovereign Gold Bond

RBI allow sale of this bond to all commercial banks, Post office , stock exchange  market like BSE, NSE etc. You can also sell this gold bond on the stock exchange market. All commercial banks allowing to buy gold bond online through net banking. It provide buyer to buy bond easily without any hassle.

What is the price of Gold Bond in India

The nominal value of gold bonds shall be fix on the basis of simple average of closing price of gold  of 999 purity published by Indian Bullion and Jewelers Association Limited for last three days of week preceding the subscription period. Price of sovereign gold bond is depend on the current market price of gold. Current price of gold bond is Rs. 4,612 for online purchase and for offline purchase price is Rs.4,662. This given price is for March 2021. It may vary further depending on the market situation.

Price of gold bond vary every year it is not fix. It totally depend on the price of gold at the actual time when gold bond issue.

Holding period for Gold Bond

The maturity period for gold bond is Eight year. However you can sell your bond after Five year. It depend on you when you want to take exit.

How much we can buy Gold bond

You can buy Maximum 4 kg and minimum 1 gram for individual. For Hindu Undivided Family (HUF) it is 4 kg and 20 kg for trust. It is for fiscal year.

What is return on Gold Bond

Sovereign gold bond gives 2.5% interest rate annually. It applicable when bond is issue to the investor. Interest credited semi annually in bank account of investor. Plus point here is Interest rate. Whereas when you purchase physical gold it not give this interest rate which you get in gold bond. Gold bond also do not have a storage cost as compared to the physical gold.

When you sell this bond after some year that time you will get the price of gold which is actual at the time of sell.

For Example. You purchase the gold bond at the price of 4612Rs for one gram in march 2021.And you plan to sell this bond in March 2029.In March 2029 gold price is Rs.6200 per gram. Then you will get price per gram is Rs. 6200.

Here is your profit=   Rs.6200 – Rs 4612 = Rs.1588 for one gram.

(Note – Above given example is for understanding purpose, we are not predicting the future price of gold.)

Is there any risk in investing SGB

The SGB Scheme is less risky. There is only risk of capital loss if gold price decrease. However investor will not lose in terms of unit of gold which he got during the purchase.

Who can invest in SGB

Person live in India as defined under Foreign Exchange Management Act ,1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions

Date of Issue

The date of issuances shall be as per the details given in the calendar below for 2020-21.

Sr. No.TrancheDate of SubscriptionDate of Issuance
1.2020-21 Series VIIOctober 12 – 16, 2020October 20, 2020
2.2020-21 Series VIIINovember 09 – 13, 2020November 18, 2020
3.2020-21 Series IXDecember 28 2020 – January 01, 2021January 05, 2021
4.2020-21 Series XJanuary 11-15, 2021January 19, 2021
5.2020-21 Series XIFebruary 01- 05, 2021February 09, 2021
6.2020-21 Series XIIMarch 01- 05, 2021March 09, 2021
Note :- Above data shown in table taken from RBI official site.

Benefit of Sovereign Gold Bond

  1. It is safest investment.
  2. There is no storage charges.
  3. Zero risk of handling physical gold.
  4. Bond will be tradeable on stock exchange within a fortnight of the issuance on a date as notified by the RBI.
  5. Bond is in digital format.

Unique features which make SGB more attractive

1. Fixed interest along with capital gain.

2 .No Expenses

3. Government guarantee, no chance of default.

4.Loan against gold bond.

Sovereign Gold Bond  vs Gold ETF

ParticularsSovereign Gold BondGold ETF
Gold SafetyHighHigh
ReturnsMore than actual return on goldLess than actual return on gold
StorageMinimalMinimal
TradabilityCan be traded and redeemed from the fifth year with the governmentTradable on stock exchange
PurityHigh due to its existence in electronic formHigh due to existence in electronic form
LoanIt can be used as collateral to avail a loanOnce can avail a loan against their Gold ETFs.
Sovereign Gold Bond VS Gold ETF

Conclusion

In India gold is an asset with social and emotional value attached to it. Most of the people in India desire to hold more gold in their house. Holding physical gold comes with certain risks and cost. Hence to replace this gold bond is good option. It is good replacement of physical gold. It is also have minimum holding option which leads to attract every small investor.

It is good option for investor who want to diversify its portfolio. It is suitable for small investor as it is risk free investment.

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