For the financial year 2022-23, the second issue of the Sovereign Gold Bond (SGB) went on sale on August 22 and will remain active until August 26. The issue price of the Sovereign Gold Bond Scheme 2022-23 – Series II was fixed by the Reserve Bank of India (RBI) on Friday at ₹5,197 per gram. This Sovereign Gold Bond Scheme 2022-23 – Series II is available for purchase from banks, Stock Holding Corporation of India Limited (SHCIL), authorized post offices and registered stock exchanges – NSE and BSE. In collaboration with the Reserve Bank of India, the Indian government has agreed to grant investors who apply online and pay for their application through digital methods a reduction of ₹50/- per gram against the face value. The issue price of a gold bond for these investors would be ₹5,147 per gram of gold, according to RBI.
Six reasons to invest in SGB were recently listed in a tweet by SBI. According to SBI, the benefits of investing in SGB include guaranteed returns of 2.50% per annum payable semi-annually, no storage hassles like physical gold, no capital gains tax on redemption, traded on exchanges, can be used as collateral for loans, and no GST or fees unlike physical gold. The benefits of investing in SGB over other types of gold have also been highlighted by brokerage firm Zerodha. According to Zerodha, investing in SGBs allows you to enjoy benefits such as you get a fixed interest of 2.5% every year, guaranteed by the Government of India and without any expenses or other charges. Gold ETFs and funds charge up to 1%. However, commenting on the risk associated with SGBs, the RBI said on its website that “there may be a risk of capital loss if the market price of gold falls. However, the investor does not lose in terms of units of gold he paid for. »
Sovereign investment gold Bonds (SGB) offer decent benefits in the form of interest income apart from being risk-free. Gold is considered a hedge against inflation. Analysts say rising global inflation and appetite for gold during the upcoming festival could lead to higher prices. SGBs are a safe alternative investment to real gold since investors will get returns linked to the price of gold and gold bond prices are linked to the price of 999 (24 carat) purity gold, as announced by the IBJA. The Sovereign Gold Bond Scheme was introduced in 2015 with the aim of replacing the ownership of physical gold. Investors purchased the SGBs for an amount of ₹29,040 crore in FY22 and FY21, accounting for nearly 75 per cent of the overall bond sales since their introduction in 2015, according to RBI data. Since the launch of the system in November 2015, a total of ₹38,693 crore (90 tonnes of gold) was granted through SGBs, according to data available on the RBI website.
Commenting on the investment opportunity in SGB, Nitin Rao, Head of Products and Propositions, Epsilon Money Mart, said, “Gold provides a good diversification option in investors’ portfolio. It is always advisable to invest 5-10% of the overall portfolio in gold. Gold also provides protection against inflation. SGB is a good option for investors to consider because it is very transparent and profitable compared to physical gold. There is no problem in storing the same items as they are directly credited to the Demat accounts of the customers. Customers can invest between 1g and 4kg of gold via this route. Given the dark clouds of political risk hovering above, gold provides a safe investment option to investors when these bonds are guaranteed by the government. The interest on these bonds is taxable according to individual brackets.
Mr. Vijay Bhambwani, Head of Research and Behavioral Technical Analysis at Equitymaster, said, “Gold prices have become very volatile in recent times due to the strength of the US Dollar Index (DXY ). Since the U.S. dollar is the billing currency in global commodity markets, any strength in the dollar leads to lower commodity prices. Markets and market participants know this, so this event is unlikely to make a significant difference to the rollout of SGB sovereign gold bonds. It should be noted that SGB investors are long-term investors rather than short-term traders. »
Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms, and not of Mint.
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