Bullish on Gold? Buy Sovereign Gold Bonds!

About Sovereign Gold Bonds

  • The sovereign gold bond scheme, which was launched in 2015, is basically government securities denominated in grams of gold. The bonds are denominated in multiples of gram(s) of gold with a basic unit of 1 gram. A citizen can buy minimum 1 gram of gold (Rs 3500 or so) and can subscribe for maximum 4kg for individual and HUFs, while the highest limit is set at 20 kg for trusts and entities.
  • Sovereign gold bonds come with a maturity period of 8 years, with an exit option from the fifth year. Sovereign gold bonds are also traded on stock exchanges within a fortnight of issuance, offering an early exit option for investors though liquidity is poor here.
  • The redemption price will be linked to the prevailing price of gold. The bond is issued by the RBI on behalf of the government.
  • Capital gains tax arising from redemption of sovereign gold bonds has been exempted. Also, indexation benefit is provided to LTCG arising to any person on transfer of bonds.
  • Sovereign gold bonds can also be used as collateral for loans.
  • The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

Gold Outlook

Our previous article on Gold (https://www.plindia.com/blog/gold-prices-keep-an-eye/) , written when the metal was trading about 1340$ or so, predicted a multiyear rally in Gold which will begin at some stage over the next 1 year.

Of course, we all know gold is a classic hedge (doing very well when the world is in crisis) and in good times, demand can perk up – and in addition, we now have dollar weakness staring us in the face and which may spur rallies in the precious metal with the slightest hint of the US economy slowing down.

Investing Options

The choices then, for anyone who wishes to invest in gold for the next 5-8 years, are many – physical gold (but storage and conversion costs?), gold jewellery (but premium, making charges and purity?), Gold ETFs (but no government guarantees or fixed returns plus management charges) and RBI Sovereign Gold Bonds !

What if you could earn “dividends” while you wait for 1800$ AND have no issues of pricing , storage or transparency? and no capital gains to pay!

That’s where Sovereign Gold Bonds score over all the options! Gold bonds also pay interest at the rate of 2.50% per annum on the amount of initial investment.

The next issue is around the corner – August 5, 2019 – Are you ready!



The RBI will issue Press Release stating issue price of the Bond before the new Issue. Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 business days of the week preceding the subscription period.

The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.

Subscribing  to the Issue

Our Wealth Desk (email us at wms@plindia.com) can be emailed by clients of Prabhudas Lilladher who have a trading account with us. If you do not have a trading account, the process requires you to fill up a simple form which our personnel will collect alongwith the cheque or NEFT payment  instructions.

Please do write in to us ahead of the next issue to invest in what we believe is a definite 5% allocation  of your portfolio!

Read more about Gold Bonds at https://www.nseindia.com/products/content/equities/sgbs/sgbs.htm or at https://m.rbi.org.in/Scripts/FAQView.aspx?Id=109


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