Sovereign Gold Bonds Subscription Window To Open Next Week. Should You Buy?

Domestic gold prices surged to an all-time high on Monday, tracking global rates as uncertainty around the rising COVID-19 cases, and worsening ties between the US and China.

Sovereign Gold Bonds Subscription Window To Open Next Week. Should You Buy?

Gold bonds come with a lock-in period of eight years

Subscription for Series V of the government's Sovereign Gold Bond (SGB) programme will open next week. After the fifth tranche, subscription under which will be be available for five days from August 3 to August 7, the gold bonds will be available next from August 31 to September 4. Domestic gold prices surged to an all-time high on Monday, tracking global rates as uncertainty around the rising COVID-19 cases both within the country and abroad, and worsening ties between the US and China.

Here are 10 things to know about the government-run gold bond scheme:

  1. In the SGB programme, which is aimed at curbing gold imports in the country, the Reserve Bank of India issues gold bonds on behalf of Government of India. The gold bonds are linked to the market price of the yellow metal. 

  2. Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme.

  3. The SGBs can be purchased from designated post offices, stock exchanges BSE and NSE, and the Stock Holding Corporation. (Also Read: How To Buy Sovereign Gold Bonds)

  4. Typically, gold shares an inverse relationship with shares, and the safe-haven appeal of the precious metal rises with any sign of increased risk in equities. Wealth planners say gold prices are set to appreciate further in the near term. (Also Read: Gold "Dream Run" May Continue)

  5. The Sovereign Gold Bond 2020-21 scheme, which first opened for subscription in April, will be available for a total 10 days; from August 3 to 7, and then from August 31 to September 4. 

  6. The gold bonds come with a lock-in period of eight years, with an exit option after first five years. 

  7. An issue price is calculated on the basis of rates provided by Mumbai-based India Bullion and Jewellers Association (IBJA). A simple average is taken of the rates of last three sessions before the date of opening of subscription. For example, gold bonds under the fourth tranche were available at the price of Rs 4,852 per gram.

  8. Online subscribers get a discount of Rs 50 per gram. This discount is aimed at promoting digital payments.

  9. Subscribers can even earn an interest on their investment in gold bonds. An interest rate of 2.50 per cent per annum is applicable. The interest is payable on a semi-annual basis.

  10. The interest earned is taxable. However, individual subscribers are exempt from capital gains tax.


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