Does it make sense to invest in sovereign gold bond?

SGBs offer a more efficient, lucrative and economical mode of holding gold compared to physical gold. Not only are SGBs a productive asset earning interest, but they have the additional benefit of a sovereign guarantee.

What is the meaning of Sovereign Gold Bond?

Sovereign Gold Bonds (SGB) are government securities denominated in gold. The bonds are issued by the Reserve Bank of India on the government’s behalf. Hence these gold bonds will be a good substitute for physical gold. The purchase and redemption upon maturity both happen in terms of cash and not gold.

What are the benefits of investing in sovereign gold bonds?

The biggest benefit of investing in SGB is that you earn interest at the rate of 2.50\% p.a., in addition to the appreciation of market price of gold. Plus, s afety is ensured because these bonds come with a sovereign guarantee.

Is it safe to invest in gold bonds?

In terms of credit risk, these bonds are 100 percent safe as they come with a sovereign guarantee. However, since the bond price is linked to the prices of gold, if the prices of gold dropped, the value of your investment will fall. This would be the case even if you owned physical gold.

What happens to bond investors when gold prices appreciate?

Investors gain from appreciation in gold prices as redemption of bonds will be based on the then prevailing prices. If gold prices treble after eight years, the investor will get the higher prices plus the 2.5\% interest. If gold prices fall, which is unlikely, investors’ returns will fall accordingly.

How long does it take to get a sovereign gold bond?

Upon application for a sovereign gold bond, you will get an application number immediately. Additionally, the RBI issues certificates to all investors in gold bonds. The certificate is delivered by the bank. Remember, it usually takes 15-30 days post-application for the issue of certificates.