2020’s last tranche of Sovereign Gold Bond opens: How beneficial was the year for gold?

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December 28, 2020 9:47 PM

It's the second consecutive year for gold to post a stellar performance as the yellow metal had also clocked a double-digit gain in 2019.

Prior to the inflows seen in the past two years, the safe-haven asset had witnessed an outflow between 2013 and 2018.Prior to the inflows seen in the past two years, the safe-haven asset had witnessed an outflow between 2013 and 2018.

For the last six months – except on July 2, 2020 – the price of gold is hovering over Rs 50,000 per 10 gm level. As a result, continuing its performance of generating a double-digit return for the second year – the yellow metal has posted a return of nearly 28 per cent in 2020.

It’s the second consecutive year for gold to post a stellar performance as the yellow metal had also clocked a double-digit gain in 2019.

To grab the opportunity to invest, apart form in physical gold, investors now have the option to invest in Sovereign Gold Bond (SGB) as the Ninth Tranche of the instrument opens on December 28, 2020. The issue will close on January 1, 2021.

“The price for the Ninth Tranche of Sovereign Gold Bond, the last for the current calendar year has been fixed at Rs 5000/gm with a Rs 50/gm discount for an online subscription. The government has seen good demand for this instrument throughout the year. As per an estimate, the RBI has helped the government raised nearly Rs 23,000 crore in the past 5 years,” said Nish Bhatt, Founder & CEO, Millwood Kane International.

While investment in physical gold has security risk – like theft, burglary etc – resulting in additional cost of protecting the precious metal, investment in SGB is not only free of such risks, but investors get 2.5 per cent per annum fixed interest on their investment and also get the Sovereign guarantee of the Government of India.

Planning to buy gold this Dhanteras? Here are some cheap and convenient ways to purchase the metal

Talking on the prospect of gold in the coming year, Bhatt said, “As we approach 2021, gold will remain in focus for investors, as central banks across the globe have pledged to keep rates low, and easy liquidity to aid growth. The latest instalment of the stimulus package from the US government will add to the existing dollar liquidity in the system and may end up weakening the greenback.”

He also pointed out some factors – like efficacy of Covid-19 vaccine, proper implementation of the vaccination process in developing countries, low-interest rate regime, and the global central bank’s stance on liquidity – that would guide the demand and price of gold in 2021.

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