Sovereign Gold Bonds: Investors of first tranche may bag 80% returns

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Investors have taken to Sovereign Gold Bonds (SGB) as an investment option in a big way. This is evident from the large number of subscriptions in these schemes from their launch until now.

As per RBI’s annual report released on Thursday, a total of Rs 25,702 crore has been raised through these schemes since its inception and 63.32 tonnes of paper gold has been sold via these bonds.

The scheme was launched in November 2015 by the government to reduce the demand for physical gold and shift a part of the domestic savings which were being used for the purchase of gold into financial savings.

In FY21 alone, the Reserve Bank of India had issued twelve tranches of SGBs for an aggregate amount of Rs 16,049 crore comprising 2.35 tonnes.

Amid the Covid-19 pandemic, gold bonds have become a safe haven for investors looking to subscribe to the yellow metal in a non-physical form. Gold bonds offer additional returns and are linked to the market price of gold.

Under the digital gold category, sovereign gold bonds are preferred by investors as they are issued by the government, on behalf of the Reserve Bank of India.

Experts believe that gold bonds are a better alternative to physical gold as there is no risk of theft, storage charge, and to top it up it comes with an interest-bearing coupon. Gold prices have been on the rise due to uncertainties created by the second wave of Covid-19 cases, concerns of rising inflation in the US, and a weaker US dollar and the outlook for the bullion is also bullish.

Anuj Gupta, VP – Commodity and Currencies Research, IIFL Securities said, “One should invest in SGB as investors can get the benefit of price appreciation and interest of 2.5%. We are targeting for gold till Diwali would be 54000 to 55000 levels and $2000 to $2050 in international market.”

Unsure of investing in SGBs? Sample this –

Investors in Sovereign Gold Bonds (SGB) 2015-16 Tranche I will get bumper returns, going by the redemption price set by the Reserve Bank of India.

“The redemption price for the early redemption of SGB Tranche I, issued in November 2015, will be Rs 4,837 per unit of SGB,” RBI said. This translates into an appreciation of about 80% over the issue price of ₹2,684 per unit of SGB.

Sovereign Gold Bond Series FY22

In FY22, as well the government has decided to issue the bonds in six tranches from May 2021 to September 2021. The first tranche was open for subscription from May 17-21.

The subscription for the second tranche of the scheme ends today (May 28). The issue price of the Bond during the subscription period is Rs 4,842 per gram, while for online buyers, the price per ten gram is Rs 4,792 after a discount of Rs 50.

The third tranche or 2021-22 Series III will open for subscription from May 31 – June 4.