Should you subscribe to Sovereign Gold Bond Scheme 2022-23 – Series II?

Six reasons to invest in SGB were recently listed by SBI in a tweet. According to SBI, the benefits of investing in sgb Guaranteed returns of 2.50% payable semi-annually, no storage hassles like physical gold, no capital gains tax on redemption, traded on exchanges, can be used as collateral for loans, and no GST and physical gold Unlike there is no charge. The brokerage company Zerodha has also highlighted the advantages of investing in SGB over other types of gold. According to Zerodha, investing in SGB gives you benefits such as you get a fixed 2.5% interest every year, which is guaranteed by the Government of India and there are no expenses or other charges. Gold ETFs and funds charge up to 1%. However, commenting on the risk associated with SGBs, RBI has stated on its website that “there may be a risk of capital loss if the market value of gold declines. However, the investor does not lose in terms of those units of gold.” for which he has paid.”

investing in sovereign Sleep Bonds (SGBs) apart from being risk free offer decent returns in the form of interest income. Gold is seen as a dam against inflation. Analysts believe rising global inflation and appetite for gold during the upcoming festival could push the prices higher. SGB ​​is a safe alternative investment to real gold as investors will get returns linked to gold prices and gold bond prices are linked to the price of 999 purity (24 carat) gold as announced by IBJA. The Sovereign Gold Bond scheme was introduced in 2015 with the intention of changing the owner of physical gold. Investors bought SGBs for an amount of 29,040 crore during the FY 2012 and FY 2011 fiscal years, about 75% of total bond sales since the start in 2015. Since the launch of the scheme in November 2015, total 38,693 crore (90 tonnes of gold) has been given through SGB.

Commenting on the investment opportunity in SGB, Nitin Rao, flagship product and proposition, Epsilon Money Mart, said, “Gold serves as a good diversification option in the portfolio of investors. It is always advisable to invest 5-10% of the allocation from the entire portfolio in gold. Gold also provides a hedge against inflation. SGB ​​is a good option for investors as it is very transparent and cost-effective compared to physical gold. There is no hassle of storing it as it gets directly credited into the demat accounts of the customers. Customers can invest anywhere from 1 gram to 4 kg of gold through this route. Given the dark clouds of political risk looming above, gold offers investors a safe investment option when these bonds are guaranteed by the government. The interest earned from these bonds is taxable as per the individual slab.

Mr. Vijay Bhambwani, Head of Research – Behavioral Technical Analysis, EquityMaster said, “Gold prices of late have been volatile due to strength in the US Dollar Index (DXY). Since US$ is the invoicing currency in global commodity markets, Therefore any strengthening in the $ results in lower commodity prices. The market and market participants are aware of this fact, so this event is unlikely to make a significant difference to the Sovereign Gold Bond SGB rollout. It should be noted that Investors in SGB are long term investors rather than short term traders.”

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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