Sovereign Gold Bonds: RBI issues fifth tranche priced at Rs 4,790 per bond
- RBI issued series 5 of SGBs on Monday
- Each bond is priced Rs 4,790
- The fifth tranche window is open till August 13
The Reserve Bank of India (RBI) issues the fifth tranche of sovereign gold bonds (SGBs) for this financial year on Monday, August 9. The SGBs will be issued to investors at Rs 4,790 per bond. Every single bond tracks the price of one gram of gold.
The fifth tranche window will be open for investors from August 9 to August 13.
Investors who apply for the SGBs using digital payments will get a Rs 50 discount and get the bonds at Rs 4,740 each.
Investors in sovereign gold bonds will receive 2.5% interest payable half-yearly. The bonds are listed on the stock exchanges and at the time of maturity the Reserve Bank will pay the prevailing value of gold.
According to market experts, SGBs are a good investment for long-term investors as they receive interest and capital gains are tax-free if the bonds are held on till maturity.
A sovereign gold bond has a tenure of eight years. Investors have the option to exit after five years on every interest payment date.
What distinguishes gold bonds from other ways of buying digital/paper gold is that while other methods of gold-buying, such as through exchange traded fund (ETF) and gold fund of funds, charge an expense of nearly 0.5% every year, SGBs have no costs associated with them.
However, the one problem with sovereign gold bonds is that they are not very liquid. Bonds in many series either do not trade or trade at a discount to the spot prices on the stock exchange. Although, the average volumes traded have been rising gradually.
Owing to the increased demand in the recent past, SGBs are currently trading at a slight premium to the spot prices of gold issued by the Indian Bullion Jewellers Association (IBJA).
The one reason why investors find gold bonds exciting is because gold is a hedge against inflation over the long term. RBI has increased its inflation estimate to 5.7% for financial year 2022. As a result, with the country inching towards a higher inflationary period, gold bonds are set to attract more and more investors over time.