Gold sovereign bonds open for subscription tomorrow: 10 things to know


The sixth tranche of this year’s gold bonds opens for subscription tomorrow amid volatile gold prices in recent days. The Reserve Bank of India set the issue price at 5,117 per gram. Those who apply online and make online payments get a discount of 50 per gram. For these investors, the issue price of the gold bond will be 5,067 per gram of gold. The minimum authorized investment is 1 gram of gold.

Gold prices in India have corrected sharply from record highs reached earlier this month. On the futures markets, gold is currently trading at 51,400 levels per 10 grams compared to August 7 highs 56,200.

“Gold sovereign bonds are an efficient way to invest in non-physical gold, in which an investor does not have to worry about storing the gold because it is in demate form and there is no no local taxes that a buyer has to pay if they buy physical gold, ”says Nish Bhatt, founder and CEO of Millwood Kane International, an investment advisory firm.

Here are 10 things to know about the latest gold bond system:

1) The Sovereign Gold Bond Scheme 2020-21-Series VI remains open until September 4.

2) The date of issue of this last tranche of gold bonds will be September 8, 2020.

3) Gold Sovereign Bonds, which are government securities denominated in grams of gold, are issued by RBI on behalf of the Indian government. Investors will receive a certificate of detention for the same.

4) Gold bonds have an eight-year maturity with an option to exit after the fifth year.

5) Gold bonds are sold through commercial banks classified Bonds (except small financial banks and payment banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices and scholarships.

6) The redemption price is based on the then prevailing gold price – simple average of the closing price of 999 purity gold for the previous 3 business days from the redemption date, published by India Bullion and Jewelers Association Limited.

7) If the gold bond is held in demat form, it can be traded on an exchange, providing an exit route within five years, subject to liquidity. The bonds are tradable on the stock exchange within fifteen days of issue. Analysts say investing in gold bonds is a good idea if you plan to hold gold until the bonds mature.

9) Gold bonds can be used as collateral for loans.

10) Gold bonds offer an annual interest rate of 2.50% to investors. Capital gains, if any, at maturity are tax free. This is an exclusive benefit available on gold bonds.

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