The Reserve Bank of India has launched Tranche-8 of the Sovereign Gold Bond for FY 2021-22. The issue price is ₹4,741 for online investors, while it is ₹4,791 for offline investors.
The issue period was from 29 November to 3 December 2021. The benefit for those who have invested in that time is that gold prices are around ₹5,000 per gram. Thus, the investors would be gaining ₹200 per gram.
The added benefits of SGB over physical gold are numerous.
The first one is the storage cost. This factor has been a nightmare for the keepers of physical gold for a long time. Ranging from security costs to insurance it is a financial nightmare for the holders.
But in the case of SGB, the investor’s gold is kept in government custody with no charges. Not only that, they receive an assured return of 2.5 per annum, that too on a half-yearly basis.
Another matter of concern for buyers and handlers of physical gold is its purity. In a market rife with imitations, duplicates and illegal gold, the government through SGB opens up an opportunity for the investors to access pure gold.
Another problem these physical holders face is the capital gain tax and GST. CGT is paid during the resale or gain of gold. Being covered under GST, it has to be paid for any transactions related to gold.
For SGB investors they don’t have to pay either CGT or GST. On top of this, it can also be traded at exchanges and used as collateral to take secured loans.
Experts believe that it is an effective way for exposure to gold, which is also the oldest high profile investment option in the financial world. Through this, it will convert the gold assets to digital and will be able to control the deficit, supporting the currency.
It has shown its power, as it has garnered ₹31,000 crore funds through this scheme and is assured as a sure hedge against the pandemic’s chaos.
The gold prices have fluctuated after the discovery of new variant and the softness in the dollar, sending it higher. The future of gold prices depends on the performance of the dollar and the decisions taken by the government.
SGB offers a good investment opportunity, especially as a long-time one, with a favourable tax return at maturity. The only problem is the lack of liquidity at the secondary market. It makes the selection of appropriate SGB series difficult.
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