The latest Sovereign Gold Bonds (SGB) 2023–24 Series IV is set to open for subscription on February 12, 2024. Issued by the Reserve Bank on behalf of the Government of India, the Sovereign Gold Bond presents an opportunity for investors to participate in the gold market through a secure and government-backed instrument.
Investors looking to diversify their portfolio or hedge against market volatility often turn to gold as a safe haven asset. The Sovereign Gold Bonds offer a convenient avenue for individuals to invest in gold without the hassle of physical storage or security concerns.
This issuance of SGB comes at a time when gold prices have shown resilience and continue to be a favored choice among investors seeking stability amidst economic uncertainties. The subscription period for Series IV presents investors with an opportunity to capitalize on the potential appreciation of gold while benefiting from additional interest income.
The issue price for the Sovereign Gold Bonds (SGB) 2023-24 Series IV has been unveiled at Rs 6,263 per gram. However, for investors making online payments, a nominal deduction of Rs 50 will be applied, bringing the effective issue price down to Rs 6,213 per gram.
In line with the directives outlined in the Government of India Notification F.No.4(6)-B(W&M)/2023 and the corresponding Reserve Bank press release dated December 08, 2023, the subscription window for the Sovereign Gold Bond Scheme 2023-24 – Series IV is scheduled to remain open from February 12 to February 16, 2024.
The determination of the nominal value of the bond is based on the simple average of the closing price of gold of 999 purity, as reported by the India Bullion and Jewellers Association Ltd (IBJA), for the last three working days preceding the subscription period. For the forthcoming Series IV, this calculation includes the closing prices on February 07, February 08, and February 09, 2024, amounting to Rs 6,263/- (Rupees Six thousand two hundred and sixty-three only) per gram of gold.
In a bid to incentivize online transactions and promote digital payments, the Government of India, in consultation with the Reserve Bank, has introduced a discount of Rs 50/- per gram below the nominal value for investors applying online and making payments digitally. Consequently, for these investors, the issue price of the Gold Bond stands at Rs 6,213/- (Rupees Six thousand two hundred and thirteen only) per gram of gold,” as per a press release issued by the Reserve Bank of India on February 9, 2024.”
According to HDFC Bank, the prices of Sovereign Gold Bonds (SGB) are intricately linked to the prevailing rates of 999 purity (24k) gold, as published by the India Bullion and Jewellers Association (IBJA). This linkage to the gold market ensures that investors can closely track the performance of their SGB investments in relation to the fluctuating price of gold.
One of the key advantages of investing in Sovereign Gold Bonds is their liquidity. Unlike physical gold, which may involve complexities in buying, selling, and storage, SGBs offer investors a hassle-free avenue to enter and exit the gold market. Investors can easily sell their SGB holdings in the secondary market whenever there is a favorable movement in gold prices, providing them with flexibility and agility in managing their investment portfolios.
This liquidity feature enhances the attractiveness of Sovereign Gold Bonds as an investment option, particularly for those seeking exposure to the gold market while also prioritizing ease of trading and liquidity. Additionally, the absence of storage costs and security concerns further bolsters the appeal of SGBs among investors looking for a convenient and secure way to invest in gold.
As investors gear up for the subscription of the Sovereign Gold Bonds 2023–24 Series IV, understanding the price dynamics and liquidity advantages associated with SGBs can empower them to make informed investment decisions.
Key Considerations Before Investing in Sovereign Gold Bonds (SGBs)
SGB discount: The Reserve Bank of India (RBI) allows Rs 50 discount to investors who register online and pay by digital means a discount. As a result, the issue price of the gold bonds for these investors would be Rs 6,213 per unit, or one gram of gold.
SGB interest rate: The investor receives a fixed interest rate of 2.5%. per annum for the current series payable semi-annually on the nominal value. The fixed interest earned is independent of the capital appreciation of Gold Bonds.
SGB Tenor: The tenor of the Bond will be for a period of 8 years with exit option in 5th year, to be exercised on the interest payment dates. The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd, either directly or through agents.
SGB Benefits:
1. Attractive Interest with asset appreciation opportunity (2.5%)
2. Redemption is linked to Gold Price
3. Elimination of risk and cost of storage
4. Exempt from Capital gains tax, if held till maturity
5. Hassle free Ownership of gold without any physical possession (No risks and no cost of storage)
6. Tax treatment: The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to
long term capital gains arising to any person on transfer of bond.
7. Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.