INFORMATION
2023-12-28T11:14:55
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Krishan Singh Rauthan
2023-12-28T11:14:55 | 2 Mins to read
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The Sovereign Gold Bonds (SGB) are one of a kind, as they merge two passions of an Indian investor – Gold and Fixed Income! Every class of India is always bullish on gold and seeks the comfort of the capital protection offered by Fixed Deposits. An SGB will offer a 2.5% coupon rate(taxable) and capital appreciation according to gold prices! One is allowed to buy even just 1 gm of gold!
|
S. No. |
Tranche |
Date of Subscription |
Date of Issuance |
|
1. |
2023-24 Series I |
June 19 – June 23, 2023 |
June 27, 2023 |
|
2. |
2023-24 Series II |
September 11 – September 15, 2023 |
September 20, 2023 |
To analyse why the upcoming September trance is a coveted opportunity, let’s analyse how the June tranche performed:
In June 2023, there was a clear demonstration of Indians' unshakeable faith in the value of gold as an investment. This was evident by their acquisition of an unprecedented 7.77 tonnes of Sovereign Gold Bonds (SGBs). The total worth of this substantial quantity amounted to ₹4,604 crores, marking a new pinnacle and underlining the increasing fascination with this precious metal. Notably, these bonds were purchased at the highest-ever issue price of ₹5,926 per gram. The quantity is triple of what was sold in 2022(2.56 tonnes)
|
Year |
Gold Price per gm (24 kt) |
Trend (%) |
|
2015 |
2634 |
-5.94% |
|
2016 |
2862 |
8.65% |
|
2017 |
2967 |
3.65% |
|
2018 |
3144 |
5.97% |
|
2019 |
3522 |
12.03% |
|
2020 |
4865 |
38.13% |
|
2021 |
4872 |
0.14% |
|
2022 |
5267 |
8.11% |
|
Aug-2023 |
6076 |
15.37% |
From 2019, gold has exhibited favourable returns, drawing an increasing number of investors who seek to capitalize on its upward trajectory. The first tranche of SGBs in 2015 was issued at Rs. 2,684/gm. With 8 8-year tenure ending in Nov 2023, the investor will get a maturity value back with no capital gains tax! Assuming the gold rate is Rs. 6200 during the maturity week, an investor will make a return of 11% CAGR, that too tax-free!
(It's important to note that gold is a volatile asset and this positive trend was interrupted by the pandemic years of 2020 and 2021. One needs to always balance one’s portfolio with diversification to hedge their risks.)
SGBs are one of the best investment bets if one has a time horizon for 8 years, to enjoy its tax benefits. While the interest income of 2.5% is taxable, the Long-term capital gain being exempt makes this asset stand out among its peers! While LTCG is 20% on most asset classes like physical gold, and real estate and 10% on Equity and Debt MFs, SGBs provide an investor the edge!
The September issue of SGB is looking to be promising. With impressive returns and tax benefits, it is certainly an asset to look at in the upcoming weeks! SGBs can be considered safe-haven assets along with no storage hassles. Is it time to diversify one’s portfolio with SGBs? A perfect combination of the 2 worlds of gold and fixed income!
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