A Good Time To Buy Sovereign Gold Bonds When Rates Near Record Highs? What Experts Say

Sovereign Gold Bonds 2020-21 Scheme: Gold prices in the country continue to hover near their all-time highs, with MCX futures scaling a record high of Rs 49,348 per 10 grams this week.

A Good Time To Buy Sovereign Gold Bonds When Rates Near Record Highs? What Experts Say

Gold prices have broken a series of records over the past few weeks

July 10 is the last date to invest in the fourth series of the government's Sovereign Gold Bond programme for the current financial year. Gold bonds under the scheme - which was launched in 2015 to curb the country's imports of the precious metal - are available for subscription for a total period of 30 days in a financial year, spread into six tranches of five days each. The launch of Series IV of the Sovereign Gold Bond scheme came when gold prices in the country were near their highest levels ever recorded. Gold prices in the country continue to hover near their all-time highs, with MCX futures scaling a record high of Rs 49,348 per 10 grams this week, after breaking a series of records over the past few weeks. But is there more upside in gold? 

Here's what experts say:

Lakshmi Iyer, chief investment officer (debt) and head products, Kotak Mahindra Asset Management Company:

“Gold has been on a dream run given the risk aversion sentiment prevailing. World ETF holdings have been steadily on the rise and looks like the momentum may continue. Gold prices may take smaller breathers, but so long as uncertainty on COVID-19 prevails, prices may continue the northward journey." (Also Read: As Gold Hovers Near Record High, Analysts Say "Dream Run" May Continue)

Joseph Thomas, head of research, Emkay Wealth Management:

"A unique opportunity to invest in gold is presented by the Sovereign Gold Bonds. The first distinctive feature of this is that, on the face value of the investment, the investor earns 2.50 per cent interest per annum during the term of the investment, that is eight years. Second, this obviates the need to hold or invest in physical gold. Third, the investment as well as the redemption will be at the prevailing market rates relevant to the specific time periods. Finally, it is an instrument issued and serviced by the RBI on behalf of the Government of India."

"These astounding features make the SGBs a really unique avenue to invest for those who would like to invest for the longer term."

Gold prices have been moving up in the international markets in the last one year in response to the uncertainties in economic growth faced by all the major economies of the world. This situation has been further compounded by the pandemic and the resultant lockdown to combat the same."

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"The uncertainties surrounding economic growth and employment continues to sweep all the major economies of the world as we are yet to contain the pandemic and clinical trials to find a resolution for the same are still on. Therefore, gold prices are likely to fund support at higher levels."

Rahul Agarwal, director, Wealth Discovery:

"Investors who are on the sidelines expecting the gold prices to correct sharply should understand the reasoning behind these elevated gold prices. Gold is currently in a secular bull trend which is expected to last for a good couple of years and there are ample reasons for this scenario to continue. Global geopolitical uncertainty, the relationship of China vis-a-vis the world, the ongoing COVID-19 pandemic, the relentless money printing by developed economies of the world, the shifting stance of global central banks from dollar to gold as reserves are some solid reasons for the gold to continue going higher."

"Gold should always be in one's investment portfolio as a diversification asset and also as a hedge against uncertainty. It is therefore our advice that although the gold prices appear elevated at these levels investors should still opt for some amount of gold buying in their investment portfolios."