The last tranche of the government’s sovereign gold bond scheme for 2022-23 opened for subscription on Monday. The government, in consultation with the Reserve Bank of India (RBI), has fixed the issue price of the fourth tranche at Rs 5,661 per gram.
Investors applying online and making the payment through the digital mode will be have to pay an issue price of Rs 5,611 per gram.
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The interest on gold bonds will commence from the date of issue and shall be paid at a fixed rate of 2.50% per annum on the nominal value of the bond.
“Gold is attractively positioned. Gold was $1,800 per ounce in 2010 and it is $1,900 per ounce today. Nearly 10 years have passed and gold has done nothing. In general, the production of gold has come off globally. The demand is also picking up because central banks are replacing US dollar denominated reserves with gold. So, there is a general tailwind demand in gold, which means that gold could see an upside in price from current levels,” said Anshul Saigal, chief investment officer, Kotak Mahindra Portfolio Management Services.
“If that is the case, gold bond is a good option because you get interest on your investment. All in all, I think this is good investment,” he added.
The sovereign gold bond scheme was launched by the government in November 2015 under the gold monetisation scheme.
The tenor of the bond is for a period of eight years with exit option in fifth, sixth and seventh year, to be exercised on the interest payment dates.
The bonds are denominated in multiples of gram(s) of gold with a basic unit of 1 gram. Among its various features, the bond can be bonds can be used as collateral for loans.
The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the RBI from time to time.
“We are not looking at the gold bond scheme as an investment bet as the issue price is not attractive at current levels. Generally, we do not recommend investors to allocate to gold within their overall portfolio,” Amit Kumar Gupta, founder, Fintrekk Capital, said.
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The issue price of the sovereign gold bonds under tranche three of the 2022-23 series was Rs 5,409 per gram for investors who made the payment through regular mode and Rs 5,359 for investors who made the payment digitally.
“Many factors are dampening the investor interest in sovereign gold bond scheme such as the lack of investor- friendly options, long lock-in period, illiquidity, comparatively lower penetration of demat accounts, lack of incentives to market such products for brokers and so on. Hence, market initiatives combined with attractive incentives to market such products is critical here besides investor education. Lots of bond portal are pushing these products now which is a good sign,” said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap.