Sovereign Gold Bond Series III subscription opens: Should you invest
The Reserve Bank of India (RBI) has revealed that the Sovereign Gold Bond (SGB) Scheme Series III for the 2023-2024 fiscal year will be open for subscription from December 18-22. The bonds will be issued to subscribers on December 28. This announcement comes as gold prices experience a significant increase, rising over 10% in 2023, even in a challenging high-interest rate environment.
Pricing and valuation of the bonds
The RBI has set the issue price at Rs. 6,199 per gram of gold. Online subscribers can, however, secure these bonds at a discount of Rs. 50 per gram. The value of these bonds is determined by calculating the simple average of the closing price of gold with 999 purity, as published by the India Bullion and Jewellers Association. This average is based on the closing prices of gold for the three working days before the subscription period begins.
Who can invest and interest rate details
SGBs are available for investment by individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions classified as residents in India under the Foreign Exchange Management Act, 1999. SGBs provide a fixed interest rate of 2.50% per annum on the initial investment amount, credited semi-annually to the investor's bank account. The minimum investment is one gram, with a maximum subscription limit of 4kg per fiscal year for individual and HUF investors, and 20kg for trusts and similar entities.
Analysts' views on SGB investment
Suresh Shukla, Chief Business Officer at SBI Securities, stated the SGB offers an attractive investment opportunity as it allows investors to diversify their portfolios and benefit from capital appreciation linked to gold prices, without the challenges of physical storage. Harshad Chetanwala, Co-founder of MyWealthGrowth.com, added that over time, gold is expected to generate returns that will likely beat inflation. This makes SGBs one of the best ways to invest in gold at the current time, if held till maturity.
