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NEW DELHI: The series-IX of the sovereign gold bond (SGB) scheme 2020-21 opened for subscription on Monday. The issue comes at a time when gold prices are trading near Rs 50,000 per 10 gram, off record highs.
Prospective bidders, who intend to subscribe to the scheme, can bid for a minimum of 1 gm of gold at Rs 5,000 per gram. There will be a Rs 50 discount for investors bidding online. The issue closes on Friday, January 1. Bond certificates will be issued on January 5.
SGB are a good investment option for those who are willing to invest in gold, but not in a physical form. The equity market is at its all-time high and gold could work as a hedging instrument and provide stability to the overall portfolio during market volatility. It also helps investors to mitigate the impact of inflation and economic uncertainties. We are expecting the international gold prices to remain firm due to rising economic uncertainties on account of second wave of Covid in Europe and weak USD; therefore, recommending to subscribe SGB scheme,” Ventura Securities said in a report.
“Investors should buy only that much gold via SGB, which does not disturb their ideal portfolio allocation. We believe that a 10-15 per cent allocation in Gold is considered good for the overall portfolio,” it added.
In case you wish to subscribe, you can do so via your bank. Besides, these bonds are also sold through Stock Holding Corporation of India Limited (SHCIL), designated post offices, National Stock Exchange of India and BSE, either directly or through agents.
“Investing in this gold bond would earn full amount at time of maturity which is a big positive. Investors looking to invest for long term i.e. 5-8 years till the maturity with motive of earning decent return can invest in sovereign gold bond,” said Ajit Mishra, VP Research, Religare Broking.
Investors would earn an interest of 2.50 per cent per annum on the amount of initial investment, which will take effect from the date of its issue and will be payable every six months. Besides, they can also see capital gains at the time of redemption, in case the price at the time of redemption is higher, said ICICI Bank.
SGBs are government securities denominated in grams of gold as substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bonds are issued by RBI on behalf of the government.
The tenor of the bond will be for a period of eight years with exit options in the 5th, 6th and 7th year, to be exercised on the interest payment dates. Besides, bonds are also tradable on stock exchanges within a fortnight of the issuance.
Among the benefits of subscribing to SGB is attractive interest with asset appreciation opportunity, redemption being linked to gold price, elimination of risk and cost of storage, exemption from capital gains tax if held till maturity and a hassle free holding as it eliminates the storage cost of physical gold, said HDFC Securities.