Gold Prices May Rise Further: 5 Reasons To Invest In Sovereign Gold Bonds

Sovereign gold bonds or SGBs as we call them backed by the government of India is an instrument to invest in gold. And it was introduced in the year 2015 by the Modi led government to channelize a part of household savings which otherwise was drawn to physical gold into this investment form of gold. Currently the IV tranche of SGBs is open from July 6 and until July 10, 2020, with issuance date being fixed at July 14, 2020.

So, if you have understood the basics of the instrument which are listed below:

1. RBI issued bonds: These bonds are issued by the RBI on behalf of the government

2. Maturity term:

They are a longer term instrument with a maturity of 8 years. Upon completion of which the redemption based on the market price of gold then is made in cash. Investors looking at making an early exit can do so after the fifth year of subscription but only on the interest payment dates.

3. Denomination:

The issuance is made in denomination of a gram of gold and in multiples thereof.

4. Dual advantage of capital appreciation and interest payment:

Gold in usual sense is a non-interest yielding asset but here we on the face value are offered 2.5% payable semi-annually all through the term of the instrument i.e. 8 years. Also, the last interest payment will be paid along with the principal payment on maturity of the instrument.

So, if your investment horizon is longer say 5-10 years and you at the same time wish to reap the benefits of holding gold in SGB form instead of the usual physical form.Here we list:

Why SGBs Score Over Other Gold Investments In Long Term?

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