Series-VI of the sovereign gold bond opens for subscription at Rs 3,785/gm


NEW DELHI: The series-VI of the sovereign gold bond (SGB) scheme 2019-20 opened for subscription on Monday. Prospective bidders, who intend to subscribe to the scheme, can bid for a minimum of 1 gm of gold through online transaction at Rs 3,785 per gm. This will be at a Rs 50 discount to Rs 3,835 price for prospective investors that will bid offline.

Investor would get a 2.50 per cent interest on the amount of initial investment, which will take into effect from the date of its issue and will be payable every six months. Besides, they can also see capital gains at the time of redemption, in case the price at the time of redemption is higher, said analysts.

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bonds are issued by RBI on the behalf of the government.

The maximum limit of subscribed is 4 kg for individual and Hindu undivided family (HUF) and 20 Kg for trusts and similar entities. The issue will be closed on October 25, 2019 and allotment will be made on October 30.

SGBs are treated more as an asset diversification strategy rather than to earn superior returns, said HDFC Securities in a recent note.

“Although investors in some of the past tranches are currently traded in the negative based on the current price, mainly due to discount in prices vis-a-vis current gold price, one needs to appreciate that gold prices are prone to fluctuations based on macro events globally and dollar/rupee rates and doing a SIP in every tranche of gold can be considered by investors, who are either underinvested in gold or have regular fresh monies for allocation among various asset classes or need to accumulate gold for wedding or other auspicious occasions,” the brokerage said.

READ  Sir Philip Green fires gun on Arcadia revamp, installing two restructuring experts to the board

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption.

In case of SGB, no capital gains tax is payable if the sovereign gold bonds are held till maturity. This is against gold ETFs, which when held for more than three years attract capital gains tax, with indexation benefits. Also, investments in gold ETF attracts TER (total expenses ratio) of 0.48- 1.18 per cent per annum of the total assets. No such charge involved with Sovereign Gold Bonds if they don’t exit through the exchanges

SGB 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 periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form.

Besides, bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

The issue price for these bond schemes are fixed based on nominal value of closing price for gold of 999 purity of the last three business days of the week preceding the subscription period. For our case, it is October 01 – October 4, 2019.

Series VII 2019-20 will be opened for subscription during December 2-6. There will be a total X series this year.





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here