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As Gold Nears 38,000, Govt’s Bond Scheme Series III Glitters for Investors

The govt’s Sovereign Gold Bond Scheme 2019-20 Series III looks attractive to investors as it is still offering gold units at an issue price of Rs 3,499 per gram.

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Updated:August 8, 2019, 3:37 PM IST
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As Gold Nears 38,000, Govt’s Bond Scheme Series III Glitters for Investors
Representative image.

Gold prices have skyrocketed, with the yellow metal surging over Rs 1,113 on Wednesday itself to hit an all-time high of Rs 37,920 per 10 gram in the national capital.

As trade tensions between the US and China escalate, investors worldwide have shifted their investments towards gold, pushing up prices globally and locally. Amid this rally, the govt’s Sovereign Gold Bond Scheme 2019-20 Series III looks extremely attractive as it is still offering gold units at an issue price of just Rs 3,499 per gram. But investors would have to rush as the scheme is open for subscription only till 9 August.

But why such a huge price difference? That’s because usually the nominal value of such bonds is based on the simple average closing price of gold of 999 purity during the last three business days of the week preceding the subscription period. Since the current scheme was opening on 5 August, gold prices during 31 July-2 August were taken into consideration. Hence, the issue price worked out at Rs 3,499 per gram.

Moreover, the government also decided to allow a discount of Rs 50 per gram from the issue price to investors who apply online and makes the payment through the digital mode. For such investors, the issue price of the gold bond was set at Rs 3,449 per gram. This means, for instance, if an investor buys 10 units of sovereign gold bonds instead of buying 10 gm physical gold, he/she can instantly save up to Rs 3,000.

In addition to the instant savings, investors will also receive a fixed interest rate of 2.5% per annum payable semi-annually on the nominal value. But remember, the tenor of these bonds is 8 years, with an exit option available only from the fifth year. So, investors can’t redeem their bond units before five years.

Resident Indian entities including individuals, HUFs, trusts, universities, and charitable institutions can invest in such bonds. One has to purchase a minimum of 1 gram of gold. The maximum amount subscribed per entity can’t be more than 4 kg per fiscal year for individuals and HUFs and 20 kg for trusts and similar entities notified by the government.

Gold bonds are sold through commercial banks, Stock Holding Corporation of India Ltd (SHCIL), designated post offices (as may be notified) and recognised stock exchanges like National Stock Exchange of India and BSE, either directly or through agents.

The gold bonds subscribed during the current Series III will be issued on 14 August.

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