How to Invest in Gold Bonds?

Bonds
1

Hey
I have been hearing about gold bonds for a while. Can you guide me how to go about it? How can I invest in gold bonds?

2

Sovereign Gold Bonds (SGBs) are one of the easiest ways to own gold without the headache of physical storage.

RBI issues these bonds on behalf of the government, which offers a fixed 2.5% yearly interest. Additionally, you can also get the benefit of gold’s market price appreciation.

The lock-in period of these bonds is 8 years, but there is a window to exit after 5 years.

Before you purchase an SGB, you need to know the recent news about this option:

  • The government has not announced any fresh SGB issues for FY 2024-25.
  • They are considering discontinuing the scheme due to rising gold prices, making it costly for them.
  • So, currently, you cannot subscribe to new bonds directly through the RBI or banks.
  • But you can buy SGBs on the secondary market via NSE or BSE, where existing holders sell their bonds.
  • Prices fluctuate with market demand and gold rates, but this is still a safe way to invest digitally.

On maturity (8 years) or early redemption (after 5 years), you get the redemption price based on gold’s average market rate.

Benefits include no risk of theft, zero making charges. If you do not want to pay taxes for the returns you get on these bonds, you can simply hold until maturity.

So, while SGBs remain a smart, convenient gold investment, fresh issues may not return. For now, secondary markets are your only way to buy and sell gold bonds.

3

Yes, as Satyam said, investing in Sovereign Gold Bonds (SGBs) is a secure way to own gold digitally. It is a combination of safety and steady returns. Here is how I invested in SGBs.

  • First, I check if a new SGB issuance is open, but as of now, there are no fresh issues for FY 2024-25 by the government. The reason is the rising gold prices, making the scheme costlier.
  • Since new subscriptions are not available, I buy SGBs from the secondary market through NSE or BSE, where existing holders trade their bonds.
  • If you want to subscribe when a new issue is open, you can apply through designated banks, post offices or stock broking platforms.

These are some of the important factors you should know about SGBs before investing:

  • The Reserve Bank of India issues these bonds in grams of gold. The minimum purchase is 1 gram and the maximum limit is 4 kg per individual annually.
  • SGBs pay a fixed 2.5% annual interest. Additionally, you can enjoy gains from gold price appreciation.
  • They carry an 8-year maturity but we have the flexibility to redeem early after 5 years if needed. Also, you can sell those in the secondary market.

In short, until the next fresh issuance, you can try buying SGBs from NSE and BSE. In case you want to start investing in gold with a low amount, you can start with digital gold or gold ETFs.