The ninth tranche of the Sovereign Gold Bonds (SGB) 2021-22 will open for subscription from Monday, 10 January and offers a good investment opportunity for investors willing to invest in Gold. The SGB will be available for subscription till 14 January. The Sovereign Gold Bond will be available at a price of Rs 4,786 per gram. For those who will apply online will get a discount of Rs 50 per gram. For such investors, the issue price of Gold Bond will be Rs 4,736.

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The nominal value of the bond is based on the simple average closing price (published by the India Bullion and Jewellers Association Ltd (IBJA)) for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. January 5, January 6 and January 7, 2022.

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The SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Central government.

But do you know how you can avail maximum benefits out of this investment. Zee Business Expert Jitendra Solanki gives top tips to maximise the gains. 

“The price for the Sovereign Gold Bond tranche-9 has been fixed at 4786/gm. SGB is an efficient way for investors looking to take exposure in gold. There is no storage cost, taxes as is the case in buying physical gold. Paper gold has a higher redemption value and can be easily used to take loans against it. SGB comes with a 2.5% coupon attached and tax advantage for its investors," Nish Bhatt, Founder and Chief Executive Officer (CEO) at Millwood Kane International said.

The scheme has been a huge success for the government, as it is evident in the fact that the government managed to raise over Rs 32,000 crores since its inception in 2015, Bhatt said.

Currently, gold prices are trading near a 2-month low. Gold prices are almost Rs 9000/10 gm down from their peak witnessed in 2020. The weakness is mainly due to the minutes of the US Fed that indicated a faster rate hike and also a reduction in bond buying than earlier estimated, she added.

Going forward, the pace at which the global central banks will unwind their monetary position, movement of the US dollar will guide gold prices in the year 2022.”

Expert Jitendra Solanki’s top tips for SGB investment 

Solanki said that SGBs is a good investment option for all those who are willing to invest in Gold. This has a benefit of capital gains tax exemption if invested for 8 years. While the investors have an option to exit after five years, they will not have the benefit of tax exemption in case if the decide to exit in 5 years. A 8-year horizon should be taken while investing in SGBs. He says a strict NO for premature REDEMPTION.

There is also additional interest, he said.

What to keep in Mind? 

The exert said that investors should know why they are thing to invest when making an entry as entry point is crucial. Over the last 8-10 years the prices have appreciated. Investors should buy only that much which does not disturb the balance of the portfolio. A 5-10 per cent allocation in Gold is considered good, he said. 

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

 The payment for the Bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. The issue price of the Gold Bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode.  

The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates.  

SGB are restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions. The minimum permissible investment is 1 gram of gold while the maximum limit for subscription is 4 kg for individual, 4 kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.