Sovereign Gold Bond: Amid high gold prices, SGB is available at a discount; Should you invest?

By: |
July 8, 2020 5:15 PM

Not only the outright discount that the investors would get by opting to invest in SGB over physical gold, but there are several other advantages also.

Sovereign Gold Bond, SGB, physical gold, gold jewellery, gold ornament, high gold prices, advantages of investing in SGB, SGB at discountOffline subscribers of the new series of the Sovereign Gold Bond (SGB) will get a further discount of Rs 50 per gram at Rs 4,802 per gram.

While gold prices are hovering around the record level of Rs 50,000 per 10 gram, the Sovereign Gold Bond 2020-21 Series – IV has been priced at Rs 4,852 per gram. Offline subscribers of the new series of the Sovereign Gold Bond (SGB) will get a further discount of Rs 50 per gram at Rs 4,802 per gram.

So, in comparison to 10 gram physical gold at over Rs 50,000, offline subscribers have an opportunity to get SBG equivalent to 10 gram gold at a discount of at least Rs 1,480, while online subscribers may avail a minimum discount of Rs 1,980 by investing in 10 units of the latest series of SGB till July 10, 2020.

Not only the outright discount that the investors would get by opting to invest in SGB over physical gold, but there are several other advantages also.

Some advantages of investing in SGB over physical gold:

  • To protect physical gold, investors need to incur expenditures on hiring lockers, getting insurance cover etc, while the SGB investors not only save such expenses, but will get 2.5 per cent interest per annum, payable half yearly on the amount invested.
  • There is risk of impurity in physical gold, while SGB doesn’t have such risks. Investors in gold jewelleries also need to pay making charges on per gram of gold, which are not recoverable in case of selling the jewelleries.
  • While investors need to pay capital gain tax at the time of selling physical gold, the tax on long term capital gain (LTCG) arising on maturity or redemption of SGB by an individual is exempted.

Some disadvantages of investing in SGB over physical gold:

  • SGB can’t give look and feel of physical gold or the satisfaction of wearing gold ornaments.
  • The maximum limit of investment in SGB for an individual investor is equivalent to 4 kg of gold in a financial year, while there is no such limit for investment in physical gold.
  • The maturity period of SGB is 8 years with an exit option from 5th year onwards, so it’s not as liquid as physical gold.

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