The Modi government had issued sovereign gold bonds in November 2015. Available at low prices from the bullion market, this paper gold is offering strong returns to investors today. Investors in the first tranche of government gold bonds (SGB) issued for the first time stand to reap huge profits. The series has an eight-year withdrawal or maturity date of November 30, 2023. During this period, the value of gold bonds has more than doubled.
It may be noted that the RBI had earlier fixed the purchase price of gold bonds at Rs 2,684 per gram. However, its maturity value is yet to be determined and disclosed. Recently, the central bank fixed the early withdrawal price of SBG Series-1 issued in the year 2017-18 at Rs 6,116 per gram. In such a scenario, it is believed that gold bond prices before 2015 will be around this. It will give good returns to the investors.
Understand profit as follows: If an investor had previously bought 10 grams of gold through gold bonds, he had invested Rs 26,840 at Rs 2,684 per gram. Now, if for the year 2017-18 series Rs. 6,116 if the fixed price of early withdrawal is taken as basis, the profit would be Rs. 61,160 will be.
The investor will get about 123 percent return. It may be noted here that the maturity value of the first gold bond is likely to be higher than the base price, as gold prices tend to rise around Diwali.
Payment of interest also: As per the notification issued by RBI on 30 October 2015, SGB offered a fixed interest rate of 2.75% per annum on the initial investment amount. Interest was to be paid on half-yearly basis. Taking into account the interest, the investor has got a return of more than 13 percent per annum. The total annual return is the sum of the CAGR and the interest rate offered by the RBI on SGB investments. Gold bonds currently offer an interest rate of 2.5% per annum.
The price is determined as follows: According to the RBI, the price of the bond is based on the general average of the closing price of gold of 999 purity. According to a report by the India Bullion and Jewelers Association Limited (IBJA), this price is determined on the basis of a simple average of the closing price of gold in the trading session three days prior to the withdrawal date.
What are Sovereign Gold Bonds: These are investment bonds (bonds) issued by the government. It was launched in 2015. This is an alternative to investing in gold. It is issued by the Reserve Bank on behalf of the government this year. It is bought in units like mutual funds.
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On selling it, one gets the amount not in gold but based on its current value at that time. At present, anyone can buy a minimum of one gram and a maximum of 500 grams of gold at a time. The limit is a maximum of four kilograms for a financial year.
How much interest per annum
You can invest in it in document form as well as in digital form. Its maturity is eight years. But withdrawal of amount is allowed after completion of five years. Government gold bonds pay interest at the rate of 2.5 percent per annum. It is payable half yearly. Although the interest earned on gold bonds is taxable, capital gains on redemption of these bonds are not taxable.