Sovereign Gold Bond Scheme – Should You Invest?

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In April 2020, the RBI had announced that it will issue the sovereign gold bond scheme in 6 tranches for this financial year.

The 7th tranche has opened for subscription on 12th October 2020 and will close on 16th October 2020.

The issue price for this tranche has been fixed at Rs. 5051 per gram of gold. For those applying online, this issue price will be Rs. 5001 per gram.

 

What is Sovereign Gold Bond Scheme?

Sovereign Gold Bonds (SGBs) are government securities mandated by the RBI and denominated in grams of gold. Sovereign Gold Bonds were introduced by the RBI in November 2015 as a substitute for holding physical gold.

Also Read: Should You Buy Gold at a Life Time High?

 

Key Features

• Investors can Invest online or by filling the application form through Banks, SHCIL offices

• Demat is optional but recommended for redemption

• Minimum investment: 1 gm  of Gold (Rs 5000 currently)

• Investment into 24 k Gold

• Investment period is 8 year with early redemption after 5 years

Also Read on FinMedium:  Industry Map of the Gold Loan Industry – 10X10Y

How Does Sovereign Gold Bond Scheme Work?

How Does Sovereign Gold Bond Scheme Work

Investor gives money and receives a certificate of Holding which is tradable after a 5-year lock-in period.

 

But Why is RBI Interested in Gold?

RBI is the treasury of the country and hence has to keep its surplus in foreign currencies and in a form of Gold. Currently, RBI Reserve is ~560 Tonnes on Gold. As gold is a great store of value.

 

And What Happens After Investment?

Why is RBI interested in Gold Bonds

 

4 Key Benefits of Sovereign Gold Bond Scheme

  1. Capital Appreciation From Gold Price
  2. A tax-efficient debt product with no capital gain tax
  3. Elimination of Risk of impure Gold  as Gold Impurity risk lies with RBI as Investor shall get paid the worth of 99.99% purity of gold
  4. Cost-Effective manner of Investing in gold :
  • No storage Cost
  • No Security Cost
  • No Making Charges
  • Low transaction charge (1% total)
  • No Hidden Expenses

 

Comparison with Gold ETF

Gold Bond vs Gold ETF

Caveat

 

Conclusion: Who Should participate in the Sovereign Gold Bond Scheme?

When to Use Sovereign Gold Bond

 

Analysis: Should You Invest in Gold Bond?

 

Serious about Investing in Gold??

We have a playlist containing 3 more videos on Gold investment explaining:

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Should You Buy Gold Now?

How to Invest in Gold ETF?

How to Invest in Gold Mutual Fund?

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Amitabh Vatsya
Amitabh Vatsya is an active Investment Vlogger (http://youtube.com/c/Sadhansimplified) | Loves to share his ideas at http://wealthsutra.wordpress.com | Follow him @amitabhvatsya
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