Should You Buy Sovereign Gold Bond VI at Rs 5067 per gram?

Should You Buy Sovereign Gold Bond VI at Rs 5067 per gram?

Sovereign Gold Bond Scheme opens for public today. The series VI gold bonds can be purchased online or physically till September 04, 2020. The price this time is fixed at Rs 5,117 per gram of gold, which is Rs 217 lesser per gram as compare to Series V at Rs 5,334. For online subscribers, the discounted price for SGB VI will be Rs 5,067. Looking at giant rally in yellow metal in past few months, the bond appears as a steal deal.

Now let’s look at price for Gold Bonds 2020-21 this year:

SGB 20-21 Schemes Price per gm

Series I

Rs 4,639

Series II

Rs 4,590

Series III

Rs 4,677

Series IV

Rs 4,852

Series V

Rs 5,334

Series VI

Rs 5,117

*Online purchase price is set at discount of Rs 50. Thus using net banking you can purchase SGB at lesser price.

In August 2020, Gold price peaked at Rs 5620 per gram in India and thus the current price of SGB is much attractive.

How does the government calculate or fix the price of Gold Bond?

The price of Gold Bond is set by the government of India. It is basically set as per the average closing price for gold of 999 purity (as published by the India Bullion and Jewellers Association or IBJA) in last three business days of the previous week of subscription. 

The price or redemption is again as per the average of previous 3 working days’ closing price of gold of 999 purity published by IBJA.

Features & benefits of the SGB Scheme:

  • The bonds have a tenor of 8 years. The investor can however take a premature exit after 5 years.
  • You are also entitled to earn annual interest rate of 2.5 per cent compounded half yearly to your bank. The interest earned is taxable as per the Income Tax Act ceiling. The capital gains on redemption are however are tax-exempt.
  • Buying and selling of SGB units is allowed on stock exchanges and this imparts absolute liquidity.
  • One can invest one gram to 4 kg of gold in one financial year.
  • You can also use these bonds to avail of secured loan. The Loan to Value ratio is applicable as Gold Loan. Recently Reserve Bank of India appreciated the LTV for Gold Loans to 90% till March 31, 2020.

How to purchase the Gold Bonds?

The bond can be purchased through designated Scheduled Commercial Banks, Post Offices, Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges like, National Stock Exchange of India and Bombay Stock Exchange.

To buy online:

  • Log in to net banking.
  • Click on buy Gold Bond Link.
  • Fill the form.
  • Make payment.
  • The purchase will be confirmed online.
  • You will also get bond receipt in your email

Should you buy Gold Bonds?

Currently RBI-issued Sovereign Gold Bonds are undoubtedly one of the best investment instruments. Being government backed investment opportunity with additional income 2.5% interest rate you are already reaping benefit of savings account on your investment. Besides you can look forward to promising appreciation in gold value in next 8 years. The appreciation in gold price is tax exempt. It is safe to park 10-20 % of your portfolio in Gold at this point in time.

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