July has so far been the best month in terms of quantity of gold and amount raised under the sovereign gold bond (SGB) scheme, that was launched in November 2015 with an objective of reducing demand for physical gold and shifting a part of domestic savings, used for purchase of the yellow metal, into financial savings.
In the July SGB issue, the government sold bonds worth Rs 2,004 crore, which means bonds equivalent to gold worth 4.13 tonnes were sold, according to the official data.
Most of the jewellers could not operate in the first three months of this financial year due to coronavirus-induced lockdown. Hence those who wanted to put money in gold resorted to SGB and gold exchange traded funds (ETF). In April to June, gold ETFs saw a net inflow of Rs 2000 crore. However, gold bonds sales in the first four months of this financial year have been the highest ever financial year sale since bonds were launched.
“SGB has turned out to be the best digitised instrument to invest in Gold, which has emerged as the best performing asset class. Record number of investors in the new Series of SGBs reflect wide acceptability for digitised investment in gold. Gold has given YoY return of 41% with expectation of giving decent returns for the rest of the year. Individuals are investing in SGB,” said Shekhar Bhandari, Senior Executive Vice President, Kotak Mahindra Bank.
Sovereign gold bonds are forms of paper gold and were an easier way to invest in gold without taking physical delivery during the lockdown period. The benefit of buying bonds is that it is a pure investment product. Traditionally, gold investors used to buy jewellery, which later used to get sentimental attachment and never remained confined to investment. SGB also gets 2.5 per cent per annum interest and capital gain exemption if held till maturity. One per cent or Rs 50 per gram discount is given to those who buy SGB by net banking.
