Investors buy gold bonds worth record ₹7,500 crore in December
- Factors behind the surging demand include gold generating robust returns in recent times, and the interest component of the bonds, among other things
Mumbai: Indian resident demand for sovereign gold bonds hit a record high of 12.1 tonnes, valued at ₹7,505 crore in the recently concluded third tranche last month, reflecting the robust demand despite equity markets ruling at record highs.
The gold backing the outstanding bonds now stands at 134.17 tonnes, worth ₹63,579 crore, which is far higher than the ₹27,326.42 crore of assets under custody at December end by the gold ETF schemes launched by mutual funds.
This was the second straight tranche which witnessed subscription demand exceeding 10 tonnes since the bonds were launched in November 2015.
The earlier issue on 20 September witnessed subscription of 11.67 tonnes valued at ₹6914.48 crore.
“Factors behind the surging demand include gold generating robust returns in recent times, continuation of the trend of financialisation of savings and the interest component of the bonds,” financial planner Amol Joshi, founder, PlanRupee Investment Services, said
The advantage of the bonds is that the quantity of gold for which the investor pays is protected, since he receives the existing market price at the time of redemption after eight years .
The sovereign gold bond offers a superior alternative to holding gold in physical form.
The risks and costs of storage are eliminated.
Investors are assured of the market value of gold at the time of maturity and annual interest of 2.5% on the initial investment.
Joshi said the interest component makes sovereign gold bonds a “one of its kind” product.
Naveen Mathur, director, commodities and currencies, Anand Rathi, said that though the outlook for the yellow metal is positive, returns in the upcoming financial year could halve to 5-6% from 10%-plus returns seen in the current fiscal (FY24), as global inflation would remain under control and US Fed rate cuts from the second half of this year could weaken the dollar, which will be a positive for gold.
According to the Reserve Bank of India (RBI), the bonds are issued in denominations of one gram of gold and in multiples thereof.
Minimum investment in the bond is one gram with a maximum limit of subscription of 4 kg for individuals, and Hindu Undivided Family (HUF), and 20 kg for trusts and similar entities notified by the government from time to time for each financial year (April to March).
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First Published:10 Jan 2024, 10:33 PM IST
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