India’s love for gold is phenomenal. Since ancient times, it has remained the country’s favourite choice as an asset and investment. In society, how much gold one holds is an important determinant of one’s social and economic status. Although with time, preference for investing in physical gold has declined, it has never lost its sheen as a preferred choice of investment.
The current economic situation and increased demand for gold bonds
The current global economic crisis – engineered by the COVID pandemic – once again has made gold dearer to investors. Investors are looking at it as a secured investment option that can safeguard their money and interest during market volatility. The sovereign gold bonds (SGBs) are considered a safe-haven investment that isn’t affected by the tumultuous market condition and promises a steady return. The second tranche of gold bonds will offer them the much-needed lifeline to save their money from drowning.
Significance of issuing gold bonds during this time
The Series II release of gold bonds is a part of the government’s plan to issue bonds in six phases during the first six months of the year. Since it has come in the wake of market turmoil due to COVID outbreak, it can be regarded as an attempt by the government to bring positivity to the market and generate funds to revive the economy post lockdown.
The RBI will conclude the sovereign gold bond subscription by 15th May and has also issued a timeline for the next four phases until August. Take a look at the table.
|Tranches||Date of Subscription||Date of Issuance
|Series III||June 08-12, 2020||June 16, 2020|
|Series IV||July 06-10, 2020||July 14, 2020|
|Series V||August 03-07, 2020||August 11, 2020|
|Series VI||August 31-Sept.04||September 08, 2020|
Investors can buy the bonds by paying in cash, but in the current scenario, the government is encouraging them to apply through online applications. It has even declared a special Rs 50 discount on issue price for investors who are applying online.
The highlights of the 2nd phase of gold bonds
- The Series II bonds will carry a purchasing price of 4,590/gm, which is lower than the batch issued in April 2020. The earlier was priced 4,639 per gram of gold.
- Any capital gain upon maturity of the bond will be tax-free – making it a better choice for investment than gold ETFs or gold mutual funds.
The current market condition has sent the demand for gold skyrocketing. When the price for physical gold is surging (the rate increased by 40% in the last year), gold bonds will offer some respite to investors looking for a secured form of investment. The first tranche of SGB issue price in April saw a subscription of 17.73 lakh units worth ₹822 crores – the highest since October 2016.
According to experts, investors in a time of uncertainties, especially like the present one, should look at long-term investment and secured return which isn’t largely affected by market ups and downs. Sovereign Gold bonds just fit into the description. In the past year, gold has offered a 45% return on investment, which is better than any asset class. If you have plans to invest in gold bonds contact Angel One – a leading, full-fledged broking house, we are known for offering complete investment solutions.