How to Invest in Sovereign Gold Bonds and Earn Interest on Your Gold

Gold is one of the most sought-after and precious metals in the world. It has been used as a medium of exchange, a store of value, and a symbol of wealth and status for centuries. However, buying and storing physical gold can be cumbersome, costly, and risky. That’s why many investors prefer to invest in gold through other means, such as gold ETFs, gold mutual funds, or gold futures and options.

But what if there was a way to invest in gold that combines the best of both worlds: the security and convenience of paper or digital gold and the returns and benefits of physical gold? Well, there is. It’s called the Sovereign Gold Bond (SGB) scheme.

The SGB scheme is a government initiative that allows investors to buy gold in paper or digital form and earn interest on it. The SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India and are backed by the full faith and credit of the government.

In this blog post, we will explain what are SGBs, what are their benefits, how to invest in them, and what is the latest tranche of SGB that is open for subscription next week. Read on to find out more.

Benefits of Investing in SGBs

SGBs offer several benefits to investors, such as:

  • No risk of loss or theft of physical gold
  • No need to pay storage or making charges
  • Guaranteed purity of 999 fineness
  • Fixed interest rate of 2.5% per annum payable semi-annually
  • Redemption at the prevailing market price of gold at maturity
  • Indexation benefit for long-term capital gains tax
  • Eligibility for collateral for loans
  • Tradable on stock exchanges

How to Invest in SGBs

SGBs are issued in tranches throughout the year by the RBI. The subscription window is usually open for five days from Monday to Friday. The minimum investment is one gram of gold and the maximum is four kilograms for individuals and 20 kilograms for trusts and similar entities per fiscal year.

The price of SGB is fixed by the RBI based on the simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period.

The payment for SGB can be made through cash (up to Rs 20,000), cheque, demand draft, electronic fund transfer, or online banking. The bonds are issued in the form of a stock certificate or a demat account. The tenor of SGB is eight years with an exit option after five years.

Latest Tranche of SGB


ParameterValue
Sale of SGBSeptember 11th to September 15th, 2023
Issuance of SGBSeptember 19th, 2023
Price of SGBRs 5,923 per gram
Discount for online paymentRs 50 per gram
Effective price for online paymentRs 5,873 per gram

The RBI has announced that the sale of the second tranche of SGB for the current financial year (2023-24) will commence on September 11th and close on September 15th. The date of issuance of the bonds will be September 19th. According to RBI, the price of SGB is fixed at Rs 5,923 per gram based on the simple average of closing price of gold of 999 purity. However, investors who apply online and make payment through digital mode will get a discount of Rs 50 per gram. Thus, the issue price for such investors will be Rs 5,873 per gram.

If you are interested in investing in SGBs, you can apply through designated banks, post offices, stock exchanges, or online platforms. You will need to provide your KYC documents, such as PAN card, Aadhaar card, or voter ID card. You will also need to fill up an application form and make the payment as per your preferred mode.

Conclusion

SGBs are a smart way to invest in gold and earn interest on it. They are also a way to support the national gold monetization program and reduce India’s dependence on gold imports. So, if you want to diversify your portfolio and enjoy the benefits of gold without the hassles of physical gold, you should consider investing in SGBs.

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