Want to start buying sovereign gold bonds but not sure how to? Start investing in Sovereign Gold Bonds as one of the best alternatives to investing in physical gold.
The Sovereign Gold Bonds is issued by the Reserve Bank of India on behalf of the Government of India that makes investing easy and convenient. These bonds are denominated in grams of gold. This bond was launched by the government in November, 2015 as a part of the scheme of monetization. The interest offered on these gold bonds is 2.50% per annum which is to be paid semi-annually.
Features of Sovereign Gold Bonds
- The maturity period of this bond is of 8 years. Investors however get an exit option from the 5th, 6th and 7th year onwards in case they do not want to continue any further. In that case, the exchange is to be exercised on the date of the interest payment.
- An investor investing in sovereign gold bonds has to invest in a minimum of 1 gram of gold.
- The maximum limit for investing in sovereign gold bonds is 4kg for an individual, 4 kg for HUF and 20 kg for trusts and entities for every fiscal year (notified from time to time). If there is a joint holding, this limit applies only to the first holder.
- The nominal value of the Gold Bonds is in Indian Rupees that is fixed according to the average closing price of gold of 999 purity that is published by the Indian Bullion and Jewelers Association limited. The date is chosen as the last three business days of the week prior to the subscription period.
- The payment for these bonds will be made through cash (upto a maximum of ₹20,000) or demat draft, or cheque or electronic banking.
- These bonds will be issued as the Government of India Stocks under GS Act, 2006. The investors will also be given a holding certificate for the same. Further the bonds can also be converted into demat form.
Advantages of investing in Sovereign Gold Bonds
- The interest income provides dual benefit throughout the holding period along with capital appreciation at maturity. Physical gold on the other hand does not provide any interest. It only has a value when sold at a price that is more than the purchasing price.
- Physical Gold has a risk of being stolen or losing it. The Sovereign Gold Bonds does not have any such things attached to it, especially while selling it.
- By investing in Sovereign Gold Bond, an investor is trusted with transparency in pricing and purity of gold.
- Such bonds are also used as collateral for getting a loan. The value of a regular gold is equal to the loan-to-value (LTV).