Sovereign gold bond opens. Four reasons to apply for this RBI-backed scheme

Those who apply in this RBI-backed scheme, they get the value of their gold weight at the time of withdrawal along with 2.50 per cent per annum additional income. So, if an investor applies for one gm of gold today then he or she will have to pay ₹5,923 for applying offline and ₹5,73 for applying online. As sovereign gold bond scheme has eight years tenor, one would get redemption amount after eight years as pet the one gm gold price at the time of redemption.

Apply or not?

Giving ‘subscribe’ tag to Sovereign gold bond scheme 2023-24 series 2, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “Gold prices have been trading slightly subdued after testing record highs of ₹61,845 per 10 grams during the second quarter of 2023. However, as we approach the wedding and festival season in India, gold is likely to attract attention all over again. As outlook for gold is positive in the medium to long term, investors can allocate 10-15% of their portfolios to gold to diversify their risk and protect their wealth against rising price pressures and economic uncertainty.”

On what extra a sovereign gold bond investor will get that a normal gold investor won’t, Anuj Gupta, Head — Commodity & Currency Research at HDFC Securities said, “Gold rate today on MCX is more or less same but at the time of redemption, an investor will get an additional 2.5% annual interest on one’s money on absolute value of one’s investment. So, one should apply for this RBI-backed gold investment scheme.”

On whether an investor should pump money in this second tranche of sovereign gold bond 2023 tranche, Sugandha listed out the following four reasons:

1] Central banks around the world are accumulating gold in huge quantities amid growing economic uncertainties and a growing push towards de-dollarization. This is seen as a vote of confidence in gold as a safe haven asset.

2] Markets are anticipating that the US central bank is near the end of its rate hike cycle. This is good news for gold, as higher interest rates tend to weigh on gold prices.

3] Concerns about a weakening global economy are likely to sustain gold’s allure as a safe haven investment. Gold is seen as a hedge against inflation and economic instability.

4] Gold prices have already corrected from their peak of ₹61,845 per 10 gm and have been consolidating around the near-term support zone of Rs.57,500-58,000 per 10 gm. This could be an opportunity for investors to add gold to their portfolios in a phased manner and sovereign gold bonds are one of the best instruments to gain exposure to gold if one has a long-term horizon.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 11 Sep 2023, 11:47 AM IST