The Reserve Bank of India (RBI) announced on Friday, September 8, the issue price for the upcoming Sovereign Gold Bond (SGB) Tranche 2, scheduled to open for subscription on Monday, September 11, 2023. The issue price has been fixed at Rs 5,923 per gram, aiming to provide investors with a decent opportunity to invest in gold.
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According to the RBI, the nominal value of the bond is determined based on the simple average of the closing price for gold of 999 purity. To incentivise digital subscriptions, the government, in consultation with the RBI, has decided to offer a discount of Rs 50 per gram less than the nominal value for investors applying online and making payments through digital modes. This means that online investors will get an issue price of Rs 5,873 per gram, making the SGB even more appealing for those looking to invest in gold.
The Sovereign Gold Bond Scheme, launched in November 2015, aims to reduce the demand for physical gold and encourage domestic savings to flow into financial assets.
Where to buy SGB?
The subscription window for Sovereign Gold Bond Tranche 2 will be open from September 11 to September 15, providing a limited timeframe for interested investors to participate. These bonds will be available through various channels, including banks, Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognised stock exchanges such as the NSE and the BSE.
Expert insights
Colin Shah, MD of Kama Jewelry, shared his expectations for the upcoming Sovereign Gold Bond Tranche 2 in the 2023-24 Series. He emphasised the security and potential returns that gold investments can offer in the current economic climate. With gold anticipated to outperform many other asset classes due to the anticipated slowdown in China, and other major economies including the US, Shah anticipates that these bonds will provide substantial returns of more than 20 percent in the long term.
Notably, according to various analyst estimates, gold is expected to rise by more than 10 percent CAGR up to the year 2026.
"This will drive high alpha-seeking investors to alternative investments and safer avenues like gold," Shah said.
Here's a look at how SGB performed since the start of FY22:
| FY22 and FY23 | Issue Date | Issue Price (Rs) | Current Price (Rs) | 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 | 5.6 |
(Source: RBI)
The above data has used the 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.
SGB investment benefits
Sovereign Gold Bonds have gained recognition as a decent investment option due to several key factors:
Government guarantee: Investors benefit from the government's guarantee on the bonds, which enhances their security.
Interest rate: SGBs offer a semiannual interest rate of 2.5 percent per annum, providing an added income stream compared to other forms of gold investment.
Capital gains tax exemption: If held for the full 8 years, investors can enjoy capital gains tax exemption, making SGBs an attractive option for long-term investors.
Zero taxation at maturity: Holding the bonds till maturity results in zero taxation, adding to their appeal for those looking to maximise returns.
Potential for long-term capital gains: Even if sold earlier, investors can benefit from long-term capital gains with indexation, provided they hold the bonds for over 3 years.
First Published: Sept 9, 2023 1:37 PM IST
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