Gold bond opens for subscription, issue price at discount to market rates

  • The issue date of the latest tranche of gold bonds will be May 25
  • The RBI issues the bonds on behalf of the Government of India

Staff Writer
Updated17 May 2021, 11:00 AM IST
Gold rates today in futures market have crossed  <span class='webrupee'>₹</span>48,000 per 10 gram
Gold rates today in futures market have crossed ₹48,000 per 10 gram(REUTERS)

The Sovereign Gold Bond Scheme 2021-22 Series-I or first tranche of gold bonds of this fiscal opened for subscription today. The issue will close on May 21. The government has fixed the issue price at 4,777 per gram of gold while investors who apply online and make the payment online will get a discount of 50 per gram. On the other hand, gold futures on MCX up for the second day and had crossed the key 48,000 level per 10 gram. In global markets, gold rates hit a 3-month high, boosted by a weaker US dollar and a dip in Treasury yields. Spot gold was up 0.6% at $1,852.39 per ounce.

Here are 10 things to know about latest sovereign gold bond issue:

1) "Gold prices are on an up move, helped by the weak US jobs data, softness in the USD, a broader view that the interest rates will be low in the US for a long time. Gold prices are trading near a 3-month high in international markets, domestically gold prices are hovering near the 48,000/10 gm level. The vaccination drive, control over the number of cases, and lockdowns internationally coupled with the movement of the USD will drive prices of gold moving forward,” said Nish Bhatt, CEO & founder, Millwood Kane International.

2) The issue date of the latest tranche of gold bonds will be May 25.

3) The sovereign gold bond scheme of govt of India was launched in November 2015 to reduce the demand for physical gold and shift a part of the domestic savings -- used for the purchase of gold -- into financial savings.

4) The RBI issues the bonds on behalf of the Government of India.

5) According to the recently released timeline for gold bonds, the government will issue the bonds in six tranches from May 2021 to September 2021.

6) Sovereign gold bonds are sold through banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

7) The issue price of sovereign gold bond is fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last three working days of the week preceding the subscription period.

8) The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the bond will be for a period of 8 years with exit option after 5th year.

9) Minimum permissible investment is 1 gram of gold.

10) Experts say that sovereign gold bond is an effective way to invest in non-physical gold, if a buyer holds on till maturity. Gold funds or gold ETFs are typically seen as more liquid options than sovereign gold bonds. Gold bonds also offer an annual interest rate of 2.50% to investors.

The investor does not have to worry about the storage of gold if held in demat form and there is no GST levy, unlike in physical gold.

Capital gains, if any, at maturity is tax-free. This is an exclusive benefit available on gold bonds.

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First Published:17 May 2021, 11:00 AM IST
HomeMoneyPersonal FinanceGold bond opens for subscription, issue price at discount to market rates

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