However, the making charges of gold are quite too high usually. There, Government of India and RBI have come up with many alternatives like gold ETFs, gold bonds etc. Now anyone can own gold in ‘certificate’ format.
Government of India has
decided to issue new series of sovereign gold bonds between January and January
18 at Rs 3,214 per gram and those who subscribe to the bonds online will get a
discount of rs 50 per gram.
What are sovereign Gold Bonds?
Sovereign Gold Bonds are
government securities denominated in grams of gold. They are substitute for
holding physical gold. SGBs are government securities hence safer to invest. Investors have
to pay the issue price in cash to any agent, authorized by SEBI and the bonds
will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on
behalf of government of India.
Who can get invest in SGBs?
People who
love to keep Gold and invest a lot in buying Gold can get SGB, it is a low –risk
investment, and it is perfect for investors with low risk to get loss. People can
earn from it as it will give fixed income bi-annually. Compare to physical
Gold, the cost to purchase or sell SGBs are quite low.
Features of
Sovereign Gold Bonds
1-
Sovereign
Gold Bonds can be used for loans; it will be issued by RBI on behalf of the Indian
government.
2-
The
Indian residents including individual (in his capacity as an individual, or on
behalf of minor child, or jointly with any other individual), HUFs, Trusts,
Universities and charitable institutions are eligible to avail these bonds.
3-
Gold
bonds are denominated in grams of gold and investments can be done in multiples
of one gram with a maximum limit of 4kg per person.
4-
The
investors will also be compensated at a fixed interest rate of 2.50% per annum
payable semi-annually on the nominal value.
5-
The
interest on Gold Bonds shall be taxable and are exempted from the capital gains
tax on redemption.
6-
Tenors
of the Bond are of 8 years with an exit option in 5th 6th
and 7th year.
7-
Bonds
will be tradable on stock exchanges.
8-
The
sovereign gold bonds also aid maintaining the current account deficit as most
of the demand for gold in India is met through imports.
Disadvantage
The bonds have a 5 years locked in period and are not eligible for
redemption. As the bonds track the gold price, if the gold price during the
bind maturity period is lower than the present day, then you will end up in
loss.
The
point here is investor will lose on the units will remain fixed, only prices
may fluctuate.
