Sovereign gold bond demand dips as price of yellow metal rises
Premium- The price of the yellow metal has recovered from two-month low on account of rising concerns over inflation, easing bond yields and weaker dollar
The third tranche of sovereign gold bonds for FY21-22 received a subscription for 14.79 lakh units, 72% lower than 53.19 lakh units purchased by the investors in the first tranche. It is even lower than the units purchased in the second tranche. In the second tranche people purchased 18.98 lakh units. The third tranche was priced at ₹4,889 per unit. One unit is equal to one gram of gold. The first tranche was priced at ₹4,777 per unit while the second tranche was priced at ₹4,842 per gram. The higher price could be the reason for the drop in the demand.
Even the net inflows in the gold exchange traded funds (ETFs) dipped to six-month low in May at ₹287.86 crore as per the data released by Association of Mutual funds of India.
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The price of the yellow metal has recovered from two-month low on account of rising concerns over inflation, easing bond yields and weaker dollar. Going forward, the expectations of higher inflation, central banks tapering will drive the prices of the yellow metal.
However, if you are planning to invest in gold, sovereign gold bonds are considered one of the best options as apart from the increase in price, investors also get a fixed interest of 2.5% per annum on the amount invested.
Sovereign gold bonds are also tax efficient for long-term investors as the capital gains on the same are tax free if held till maturity that is 8 years.
However, experts say that only those investors who want to invest in gold for the long-term should opt for gold bonds as they may find it difficult to exit before maturity. One can exit before maturity by selling the bonds on exchange. Premature withdrawal is possible after 5 years.
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