SGB: Time to increase allocation in gold
SGBs have been a significant success, with the government raising over Rs 32,000 crores since its inception in 2015.
The government’s Sovereign Gold Bonds (SGBs) Scheme 2021-22 will be issued in four more tranches during the current financial year – from October 2021 to March 2022. Series VII, the first incoming tranche, will remain open for subscription from October 25 to October 29. As part of the sovereign gold bond scheme, the Reserve Bank of India (RBI) releases interest-bearing bonds pegged to the market price of the yellow metal. The RBI issues gold bonds on behalf of the government.
The price of the seventh tranche of Sovereign Gold Bonds has been set at 4761/gm. The government’s gold bonds have been a huge success, with the government raising more than Rs 32,000 crores since its launch in 2015. Individuals, Hindu Undivided Families, trusts, universities and charity institutions can participate in the sovereign gold bond scheme.
SGBs are an excellent way to invest in gold without having to worry about the cost of storage or, in the case of gold jewellery, additional costs. SGBs offer investors an edge due to tax savings and frequent interest payments. The investment in SGBs aided the government in reducing its deficit and codified the country’s gold holdings.
Gold prices have increased for two weeks in a row. The increase in the price of yellow metal is due to the Federal Reserve’s tapering discussions. Concerns about how quickly global central banks may unwind their liquidity policies. Any move toward greater liquidity will result in an increase in interest rates.
Gold prices have strengthened despite a rise in the US bond yield and its influence on the USD. Finance experts believe that gold prices will be led in the future by the outcome of the US-China trade talks, the new Covid-19 model in China and its impact on corporate activity, and central banks’ liquidity and rate hike policies.