Sovereign Gold Bonds (SGB): Can you expect a new series in August-September?
Amid apprehensions around the likely SGB launch and timeline, analysts largely seem hopeful of its launch.
At a time when there is high apprehension regarding the highly lucrative gold SGBs as to whether or not the centre will continue with the scheme on offer by the Reserve Bank of India, analysts and industry stakeholders are undecided as to what may happen.
Gold SGBs first issue and its exorbitant gains since then
Gold SGBs were first released at a issue price of Rs 2,684 in November 2015, and now 9 years down the line, gold is trading at around Rs 7,200 per gm in the spot market.
What analyst says
Investors have enjoyed the best returns (up to 12 per cent per annum net of income tax) on SGBs maturing in August 2024, with the prices having doubled from 2016 to 2024, according to Naveeen Mathur, Director-Commodities and Currencies at Anand Rathi Shares and Stock Brokers.
What analyst says
Such returns are better than the returns from most other asset classes with similar risk profile, says Mathur.
What analyst says
Mathur also mentioned a few reasons that make SGBs an attractive proposition for both the Centre as well as investors.
Lower borrowing costs for government
The interest rate set by government @ 2.75 % remain lower than the interest offered on 10 year government bonds at around 7 – 8 % making it a lower borrowing cost option for government.
Redemption to be less burdensome for centre and render fresh investments more attractive
Mathur noted that with government also reducing Customs duty on gold in the Budget could also lessen the outgo due to redemption of sovereign gold bonds (SGBs) and making fresh investment in these bonds more attractive.
Imports issue also checked to some extent
An analysis of the government's trade data shows that Gold imports rose 30 percent in 2023-24 to around 795 tonnes while 44.3 tonnes was made as an investment in SGBs in 2023-2024, which saved around 5.5 % of imports in terms of quantity.
Can the scheme be eventually withdrawn?
Hence overall we may not see SGBs going completely out of the market in near future though the number of issuances may come down on an annual basis, noted Mathur.
What analyst says
One can expect the launch of a new series in some time, according to Anuj Gupta, Head-Commodities and Currencies at HDFC Securities.