Latest tranche of RBI’s Sovereign Gold Bonds is on sale; is it a good buy?
At ₹4,790, the new Sovereign Gold Bond scheme is priced lower than the earlier tranches due to softening of gold prices; also, gold in the portfolio is always welcome
The fifth tranche of the Sovereign Gold Bond (SGB) scheme of 2021-22 opens for subscription, priced at ₹4,790. If you’re buying it online, you get it for ₹4,740 following a ₹50 discount. Does it present a sound investment proposal?
The issue has been priced after the closing price published by the India Bullion and Jewellers Association Ltd (IBJA) for 999 purity gold of the last three business days of the previous week. Since prices of the yellow metal have corrected in the recent past, the SGB issue price is lower than its immediate three predecessors in the 2021-22 scheme, said a Mint report. For instance, the fourth tranche was priced at ₹4,807 per gram.
Lower prices
“Gold prices have softened in the past few weeks to touch a one-month low,” it quoted Nish Bhatt, founder and Chief Executive Officer of investment consulting firm Millwood Kane International, as saying. “In the past one week alone, it has dropped nearly ₹1,000/10gm in value.”
Also read: Want to add some gold to your nest egg? Answer these questions first
“The rising US dollar and treasury yields on the back of a sooner-than-expected policy tightening by the Fed have largely led to softening of gold prices. Gold prices domestically and internationally have traded in a narrow range in the past few months,” he added.
While gold may or may not gain in the coming weeks, the metal is often recommended by most investment advisors. It helps diversify the portfolio and hedges against inflation risk. Hence, going for the SGB may present a good opportunity.
“Investment in SGBs comes with an interest coupon payable semi-annually. Investment in SGB is a superior alternative to physical gold,” said Bhatt, as quoted by the report. “The investments in non-physical gold will help the government keep a check on the currency and larger fiscal deficit.”
How to buy them
The RBI issues the scheme on behalf of the government. The bonds can be bought from banks (other than payment banks and small finance banks), Stock Holding Corporation of India Ltd, designated post offices, as well as recognised stock exchanges (NSE and BSE).
The bonds come in denominations of 1 gram. The tenor of the bond is 8 years, and exit options are available after the fifth year.
