Investing in gold by buying gold coins, biscuits, or even jewelry is very common in India. However, the new generation finds it increasingly cumbersome to buy physical gold.

Sovereign Gold Bond (SGB) and Gold ETFs are the solution.

In this article we will discuss what is SGB, its features & benefits, and how to invest in them.

INTRODUCTION

The Sovereign Gold Bond (SGB) scheme was launched by the Government Of India (GOI) in 2015 with an aim to reduce the demand of physical gold in India.

FEATURES

-They are issued by RBI in tranches on behalf of the GOI. 

-SGBs are restricted in sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions

-The bonds ae denominated in gram(s) of gold with basic unit as 1gm

-The minimum investment is 1gm and the maximum allowed is 4kgs for individuals & HUF, 20Kgs for Trusts

-There is a lock-in period of 8 yrs with an exit option after 5 yrs to be exercised on interest payment dates

-The price of the Bond will be fixed in Indian Rupees on the basis of a simple average of the closing price of gold of 999 purity, 

published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period. 

The issue price of the Gold Bonds will be ₹ 50 per gram less for those who subscribe online and pay through digital mode.

-SGBs give a fixed interest of 2.5% per annum payable semi-annually

HOW TO INVEST

The Bonds are sold through:

1. Scheduled Commercial banks (except Small Finance Banks and Payment Banks)

2. Stock Holding Corporation of India Limited (SHCIL)

3. Designated post offices

4. Recognized stock exchanges viz., NSE and BSE The Sovereign Gold

In 2021 bonds would be issued in six traches of which two are left. The schedule for these are as follows:

Tranche - 2021-22 Series V, Date of subscription - Aug 09-13, 2021, Date of Issuance - Aug 17, 2021

Tranche - 2021-22 Series VI, Date o subscription - Aug 30-Sep 03, 2021, Date of Issuance - Sep 07, 2021

BENEFITS

Considering the buying, storage, and quality-related issues of physical gold, investing gold via SGB makes sense. In addition, there are 2 streams of income, 

the first is the fixed interest of 2.5% per annum paid semi-annually. The second is the potential for capital gains in future as gold prices move up.