From Monday, you can buy gold bonds again; albeit at a higher price

If you missed the first tranche of Sovereign Gold Bond (SGB), the offer for which ended on May 21, you can pick up the security from Monday. The offer will be open from May 24 to May 28.

You can buy these bonds from 8 am on Monday till 11 pm, May 28.

The price of second tranche was announced By Reserve Bank of India (RBI) on Friday night. This time it will be priced at Rs 4,842/gm, Rs 65/gm higher than the first tranche that was Rs 4,777/gm in first tranche.

Generally, the value of the bond is based on the simple average closing price of past three days released by the India Bullion and Jewellers Association Limited (IBJA).

100% rise in price

SGB was first introduced in the end of 2015. The price of gold per gram fixed for the first tranche was Rs 2,684. In February 2016, however, the price for the second trench was fixed at Rs 2,595/gm. This was the lowest price for SGBs.

“The price of SGB soared by almost 100% within a period of just 5 years. In February 2016 the price was Rs 2,595/gm and in May, 2021 per gram price grows to Rs 4,842/gm.” said Nilotpal Banerjee, a financial analyst based in Kolkata.

Price movement

According to RBI data, in FY17 the price was between Rs 3,100/gm and Rs 3,300/ gm.

In FY18 the price varied from Rs 2,800/gm and Rs 2,950/gm. In FY19 the price rose between Rs 3,100/gm and Rs 3,300/gm while in FY20, the price was between Rs 3,200/gm and Rs 4,200/gm.

In FY21 the price jumped and crossed the Rs 5,000/gm mark and hovered between Rs 5100 and 5200.

But this year, the price has again come down to Rs 4,700-4,800 range. This is the best time to buy as many experts feel that the price of gold will again cross Rs 53,000/10 gm mark soon.

Where can you buy?

One can buy these gold bonds from scheduled commercial banks, except small finance banks and payment banks, Stock Holding Corporation of India, designated post offices, and recognised stock exchanges — National Stock Exchange of India and the Bombay Stock Exchange.

The maturity period of gold bonds is 8 years with an option to exit after the fifth year to be exercised on the next interest payment dates.

A person is eligible to hold a maximum of 4 kg of gold through SGBs, where any charitable institutes, trusts and similar entities can hold as much as 20 kg through SGBs in a fiscal year.

Bottom Line

Since October 2015, every year RBI floats one or two series of SGB consisting of 6-12 tranches.

Till FY 20,  Rs 9,652.78 crore, equivalent to the value of or 30.98 tonnes of gold, has been raised through the SGB in 37 tranches.

In FY 21 and FY 22, another 13 tranches have been floated, including the one that closed on May 21.