The third tranche (IIIrd) of the Sovereign Gold Bond (SGB) scheme for 2023-24 has opened for subscription on Monday and will be available till December 22. The issue price for the same has been fixed at ₹6,199 per gram of yellow metal. Online subscribers can, however, secure these bonds at a discount of ₹50 per gram.
Despite this surge, the question remains: Is this series a viable investment choice?
Understanding Sovereign Gold Bond (SGBs):
Available through banks, designated post offices, and recognised stock exchanges, SGBs provide a means of investing in gold without the necessity of physical possession.
Why consider investment?
For those willing to commit until maturity (an eight-year term), SGBs offer a secure investment option backed by sovereign guarantees, mitigating credit risks.
Unlike physical gold, SGBs generate income through interest payouts. It pays interest of 2.5% along with the price appreciation which no other gold investment offers.
Experts advocate SGBs for
gold-oriented investments or those interested in a Systematic Investment Plan (SIP). The bonds accommodate substantial investments up to 4 kgs for larger investors, while retail investors can start with as little as 1 gram.
Suresh Shukla, Chief Business Officer at SBI Securities, highlighted, “The upcoming SGB presents a compelling investment opportunity... without the challenges of physical storage.”
Tax implications also favor SGB investors, with interest payouts being taxable while capital appreciation upon maturity remains tax-exempt.
Additionally, SGBs eliminate concerns about physical gold storage, existing in dematerialised (demat) form.
Here's a look at how SGB performed since the start of FY22:
| FY22 and FY23 | Issue Date | Issue Price (₹) | Current Price (₹) | Returns |
| 2021-22, Series I | May 25, 2021 | 4,777 | 5,926 | 24.05% |
| 2021-22, Series II | June 1, 2021 | 4,842 | 5,926 | 22.39% |
| 2021-22, Series III | June 8, 2021 | 4,889 | 5,926 | 21.21% |
| 2021-22, Series IV | July 20, 2021 | 4,807 | 5,926 | 23.28% |
| 2021-22, Series V | August 17, 2021 | 4,790 | 5,926 | 23.72% |
| 2021-22, Series VI | September 7, 2021 | 4,732 | 5,926 | 25.23% |
| 2021-22, Series VII | November 2, 2021 | 4,761 | 5,926 | 24.47% |
| 2021-22, Series VIII | December 7, 2021 | 4,791 | 5,926 | 23.69% |
| 2021-22, Series IX | January 18, 2022 | 4,786 | 5,926 | 23.82% |
| 2021-22, Series X | March 8, 2022 | 5,109 | 5,926 | 15.99% |
| 2022-23, Series I | June 28, 2022 | 5,091 | 5,926 | 16.40% |
| 2022-23, Series II | August 30, 2022 | 5,197 | 5,926 | 14.03% |
| 2022-23, Series III | December 27, 2022 | 5,409 | 5,926 | 9.56% |
| 2022-23, Series IV | March 14, 2023 | 5,611 | 5,926 | 5.61% |
(Source: RBI)
The above data has used price of SGB for the first issue of FY24 as the benchmark price to calculate returns. The above table shows that had an investor bought gold bonds in any of the tranches in the last 14 issues in FY21 and FY22, he/she would be sitting on profits.
Portfolio diversification
Gold's historical resilience during economic flux, geopolitical uncertainties, or currency devaluations elevates its status as a safe-haven investment, thereby driving significant demand.
As the global economy grapples with geopolitical tensions, gold retains its appeal as a hedge against uncertainty.
However, while gold offers stability, it’s crucial to view any investment decision within the broader portfolio context and long-term financial goals.
Experts suggest an ideal portfolio allocation of 8-12% to gold to provide a safety net during uncertain times.
First Published: Dec 18, 2023 9:34 AM IST
