Sovereign Gold Bond scheme opens: Check price, minimum and maximum limit, other details

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash, and the bonds are redeemed in cash on maturity.

A person resident in India, as defined under Foreign Exchange Management Act, 1999, is eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

Those looking to subscribe to the SGBs in this tranche can apply through banks, Stock Holding Corporation of India Limited (SHCIL), stock exchanges NSE and BSE, designated post offices or through agents.

The bonds are issued in denominations of one gram of gold and multiples thereof. Minimum investment in the bond is one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).

The bond's tenure is for eight years, with an exit option after the fifth year to be exercised on the interest payment dates.

The bonds bear interest at the rate of 2.50 percent (fixed rate) per annum on the initial investment amount. Interest is credited semi-annually to the bank account of the investor, and the last interest is payable on maturity along with the principal.

Nish Bhatt, Founder and CEO at Millwood Kane International, said that investment in gold through SGB is a decent option as it provides liquidity, doesn't require any storage cost and is easier to redeem.

"Also, it comes with an interest coupon payable semi-annually," he said.

"Investment in SGBs has received a robust response. RBI has already raised a total of over Rs 25,702 crore from November 2015 till FY21," Bhatt said.

On gold prices, he said that the yellow metal is currently trading near a 3-week low, and the softness is largely due to the encouraging economic data set being reported by the US.

"The strength of the dollar is also one of the reasons for the weakness in gold prices. Gold prices have risen around 8 percent a year to date in rupee terms. Moving forward, gold prices will be guided by the pace of rate hikes and unwinding of liquidity measures by global central banks to contain inflation," Bhatt said.