The first tranche of sovereign gold bond for FY21 saw folks subscribe to a record 17.73 lakh models worth ₹822 crore as per information supplied by the Reserve Bank of India. This is the best ever subscription for the reason that October 2016 issue. One unit of gold bonds is the same as one gram of gold and was priced at ₹4,639 for the primary tranche of FY20.
The first issue of the sovereign gold bond scheme got here in October 2015 and folks purchased 9.14 lakh models worth ₹245 crore. Its reputation surged as it’s the solely gold funding choice to pay mounted assured curiosity on funding in gold.
The October 2016 issue acquired the best subscription as buyers purchased 35.98 lakh models of gold bonds worth Rs1,081 crore. The issue was priced at Rs3007 per unit.
However, publish October 2016 the curiosity in gold bonds has been declining.
“You need to see the response to gold bonds consistent with efficiency of different asset lessons together with equities which did comparatively higher in 2017 in comparison with gold. As folks have a tendency to maneuver in direction of higher performing asset lessons. Along with that folks realised the liquidity isn’t excellent within the secondary marketplace for gold bonds which makes exiting the bonds earlier than the maturity little tough,” mentioned Chirag Mehta, senior fund supervisor, various investments, Quantum Mutual Fund.
This yr the April issue of gold bonds opened for subscription on 20 April and closed on 24 April 2020, a pair of days earlier than Akshay Tritiya, an event thought-about auspicious to put money into gold. “Around 5-10% of the subscription may very well be attributed to the lockdown as folks couldn’t buy bodily gold which they often purchase on the event of Akshaya Tritiya and a few of them opted for gold bonds as a substitute,” mentioned Chintan Kotak, Director, IIFL Securities Ltd.
Apart from this, gold is taken into account a protected haven asset. “In times of uncertainty, gold has always been a go to asset class,” mentioned Saurabh Bansal, founder of finatwork wealth companies. This yr as we’re combating the Coronavirus pandemic, different asset lessons together with equities have been thrashed badly, buyers are flocking to safer belongings comparable to gold. In the previous one yr gold has delivered a return of round 45%.
“People are understanding the significance of asset allocation and are shifting a portion of their cash from different asset lessons to gold,” mentioned Kotak.
Sovereign gold bonds are thought-about one of one of the best options to put money into gold. “We have seen vital response in sovereign gold bonds in latest instances as buyers obtain curiosity along with any favorable motion in gold costs,” mentioned Bansal.
The Reserve Bank of India has introduced the dates of the upcoming points of gold bonds until September. The subsequent issue will open for subscription on 11 May
“This upcoming issue is prone to see good subscription or higher subscription as we’ve already began receiving queries for funding from our purchasers who’ve already invested in gold bonds and wish to make investments extra in addition to those that are planning to put money into them,” mentioned Chintan Kotak, Director, IIFL Securities Ltd.
Investors ought to have gold of their portfolio because it supplies diversification however mustn’t allocate greater than 10% of their belongings in gold. While investing in gold bonds you must maintain the lock-in in thoughts.
“Gold bonds swimsuit these with an extended time horizon as these bonds include lengthy maturity (eight years) and restricted liquidity within the secondary market. Those who want to take positions for a shorter interval, gold ETFs and gold financial savings mutual funds would swimsuit them higher,” mentioned Bansal.