The second tranche of the Sovereign Gold Bond (SGB) scheme 2022–23 will be made available by the Reserve Bank of India starting on August 22. The Sovereign Gold Bond 2022-23 (Series II), that opens for subscription comes at a crucial time for investors. The sovereign gold bond issue price has been fixed at Rs 5,197 per gram, as per a notification by the central bank. The second tranche of the RBI sovereign gold bond scheme will remain open till August 26, Friday.
The duration of the investment is eight years with an exit option available after the fifth year on the dates of the interest payment of the bond.
How does it work?
The RBI issues SGBs during the fiscal year in a variety of tranches. These securities are offered through banks, brokers, post offices, and online distribution channels. To encourage investors to purchase SGBs online, a discount of INR 50 per gramme is provided to those who do so digitally.
It is significant to remember that the RBI releases new SGB series for sale in the market on a yearly basis. Therefore, you may always wait for the announcement of the following issue if you missed the most recent one. The bonds are available for purchase in physical, digital, or dematerialized forms.
Is there any opportunity to make some extra earnings?
An investor who is looking to take an exposure to gold gets an additional return when they choose the sovereign gold bond as compared to the other investment options in gold.
On one hand, the bond gives the benefit of appreciation in the price of gold but at the same time there is an extra return available. This is in the form of 2.5% interest that is paid out on the bonds each year. This interest is over and above the price appreciation, so it makes the bonds attractive in terms of taking an exposure to gold.
Another form of extra earning for the investor is if they invest online and through a digital mode then they get another Rs 50 off per gm, so their cost price in the issue becomes Rs 5,147 per gm.
Should my portfolio have gold?
Gold is an important part of the asset allocation mix of an individual’s portfolio. There must be some exposure to it plus there is an added benefit of returns in India.
There are two factors that impact the returns from gold in India. One is the international price change and the other is the exchange rate movement. A look at the returns from gold prices over the last 10 years based on changes in spot prices shows that the local prices have always given better returns than just the international price movements. This can be directly linked to the weakening of the rupee.
An investor looking to take exposure to gold for the long term should be looking at this offering because there are several factors at play. One is that the price at the current moment holds out scope of appreciation over the years. Adding the expected rupee depreciation would only make it more favourable for investors.
(To receive our E-paper on whatsapp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)
