Latest Sovereign Gold Bond Tranche Opens For Subscription On Monday

The latest tranche of the government’s popular Sovereign Gold Bond Scheme opens for subscription on Monday and will stay open till Friday, according to a notification on the website of the Reserve Bank of India.

The issue has been priced at Rs 6,263 per gram, the average closing price published by the India Bullion and Jewellers Association on the three working days preceding the subscription period. As has been the case since the first issue of the Sovereign Gold Bond, a discount of Rs 50 per gram is available on subscription through digital mode.

Sovereign Gold Bonds, also known as SGBs, are government securities denominated in grams of gold and were introduced as an alternative to physical gold. The RBI is issuing the bonds on behalf of the Indian government. Individual investors can buy a minimum of 1 gram and a maximum of 4 kg in any given financial year.

Two main features of these bonds make them attractive for long-term investors. First, any capital gains made over the eight-year holding period of the bonds will be exempt from tax if held until maturity. And second, the bonds bear an interest rate of 2.5% payable semi-annually.

The bonds can be withdrawn prematurely after five years, but gains, if any, are not exempt from tax.

International gold prices have been on the rise, accompanied by a broad decline in bond yields. Currently, the international price of gold stands at $2,037.45 per troy ounce, not too far away from all-time highs of over $2,100.

“Investors should consider subscribing to the Sovereign Gold Bond on an annual basis rather than deploying large sums at once,” said Prableen Bajpai, founder of Finfix Research and Analysis. “The idea should be to build up an allocation to gold over a period of time by averaging the purchase price every year.”

Financial advisors generally advise individuals to limit their allocation to gold to 10% of their corpus.