Once again Sovereign gold bonds are back in the interest of people. In the current FY24 year people’s interest in Sovereign bonds is as high as the most-ever response seen during FY21.
When jewelry stores were shut in FY21 due to covid-lockdowns, 32.4 tonnes of Sovereign Gold Bonds were subscribed in 12 tranches, one every month. Then investment experts proposed SIP in Sovereign Gold Bonds.
However, in the ongoing fiscal year, only one tranche per quarter has been disclosed. In three quarters so far, 31.6 tonnes of sovereign gold bonds were subscribed by investors.
Along with the previous three tranches, the upcoming tranche of SGB is in March 2024. In the current year FY24, the total amount is expected to cross the FY21 record subscription level, which was 32.4 tonnes.
Experts say the SGB market is now sagacious. The reason for the excellent response in FY21 and FY22 was because of the lockdown and jewelry stores were shut while SGB buying was possible through net banking.
FY23 saw a drop in gold bond subscriptions leading to surmise that investors are losing interest after pandemic challenges were over.
However, this year’s recovery is very strong, and the total subscription for the first three quarters is 157 % higher than FY23’s subscription. Some of the leading online brokerages have also started selling Sovereign Gold Bonds on their platforms.
SGB Expert Analysis
“The Sovereign Gold Bond market has become sagacious as the type of response received in this year and it will continue to be so going forward. The sovereign guarantee also entices investors. This is making people firmly believe in the product. Due to increasing prices and returns in gold bonds, the growing middle class started investing more in it. Debajit Saha, lead analyst, metals at LSEG said.
In FY16 since its launch, a total of 134.2 tonnes of gold have been sold under sovereign gold bonds. As SGB is purely a financial product, it also means that an equal amount of imports has been saved.
Recently, there has been a lot of interest shown in SGB because fewer tranches are being announced. Investors are probably running after previous profits because the first tranche recently gave good returns, Gazal Jain, Fund Manager, Quantum AMC said.
Jain further added, that through various intermediary channels, SGBs are actively being promoted to investors.
SGB Long-Term Investment Platform
SGBs are a good long-term investment approach as they offer tax advantages and interest payouts. However, due to limited liquidity, SGB cannot be turned into cash quickly which remains the major drawback of this thing, she said.
Gold Bond’s maturity term is 8 years and the best thing about it is taxes aren’t charged from the profit you make from it. This resulted in double-digit tax-free returns in the first trance whose term got over at the end of November 2023. Apart from this, gold bond investors get 2.5% interest on the return on Investment.
In FY16 according to the calculations, Sovereign Gold Bonds issued the first tranche for Rs 2,668 and redeemed Rs 6,132. A total of 10.9% of compound annual return has been received in eight years and this doesn’t include the interest paid for half of the years during this period.