This latest gold bond issue comes at a time when gold prices have corrected significantly from August highs
Sovereign gold bonds are issued by the RBI on behalf of the Government of India
The latest tranche of sovereign gold bonds will open for subscription today. The Reserve Bank of India, on behalf of government of India, has fixed issue price at ₹5,051 per gram of gold. Investors who apply online and make payment against the application through digital mode get a discount of ₹50 per gram. For them the issue price is ₹5,001 per gram. The Sovereign Gold Bond Scheme 2020-21-Series VII will close for subscription on October 16.
Gold bonds have a maturity period of eight years with an exit option after fifth year. The redemption price is based on the then prevailing price of gold.
Here are 10 things to know about sovereign gold bond scheme:
1) This latest issue comes at a time when gold prices have corrected significantly from August highs. In the futures market, gold had hit ₹56,200 per 10 gram.
2) The issue price in the latest issue of gold bonds has been fixed based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three business days of the week preceding the subscription period, October 07 – October 09.
3) Sovereign gold bonds are issued by the RBI on behalf of the Government of India.
4) The sovereign gold bond scheme was launched in November 2015 to reduce the demand for physical gold and shift a part of the domestic savings into financial savings.
5) The minimum permissible investment is 1 gram of gold.
6) The gold bond will be sold through banks (except small finance banks and payment banks), Stock Holding Corporation of India (SHCIL), designated post offices, and recognised stock exchanges (NSE and BSE).
7) 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 though they are listed on stock exchanges.
8) Gold bonds offer an annual interest rate of 2.50% to investors.
9) 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.
10) Capital gains, if any, at maturity is tax-free. This is an exclusive benefit available on gold bonds.