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Should you invest in Sovereign Gold Bond Schemes?

Should you invest in Sovereign Gold Bond Schemes?

Guide on Sovereign Gold Bond Schemes

Volatile times call for safer measures. Investors flock to park their hard earned money into safer and shinier investment avenues – Gold.

When it comes to gold, we know the extreme reverence it holds in Indian households, way beyond its market value. What if we told you that you can buy gold without the hassle of holding it physically and worrying about its safety?

Wondering how? Well, one such alternative is the sovereign gold bond or SGB scheme offered by the RBI. These schemes are a secure investment option, considering that gold prices are less prone to market fluctuations.

Having said that, let us have a look at some of the benefits that this scheme brings along:

  • Low-risk investment

This is perhaps one of the most talked-about benefits of SGB schemes. Typically, a sovereign gold bond is issued in correspondence with the Government Securities Act, of 2006. As a result, this backing by the government makes these schemes one of the safest investment options in the country. Furthermore, the only risks pertaining to sovereign gold bonds could be attributed to market fluctuation in gold prices.

  • Provides capital appreciation

Since this precious metal’s price tends to rise in the long term, the rate of return from SGB schemes is usually on the higher side. Moreover, during times of market turmoil, more and more investors shift towards gold investments as they feature the substantial potential to hold their value even when the market underperforms.

  • Your perfect hedge against inflation

As mentioned earlier, investment in sovereign gold bonds is great for capital appreciation. While most investors remain sceptical about investments during times of rising inflation, you can devise real growth in your investment portfolio by investing in SGB schemes. Such schemes can help you accumulate enough wealth, breaking the inflationary boundaries.

  • Extends loan facility

Surprise! You can also use your sovereign gold bonds as a collateral to obtain loans. Interestingly, you can get up to 75% of the value of such bonds as a loan from leading financial institutions.

  • Could be a source of extra income

Investing in SGB schemes can help you earn extra income as they feature an annual interest rate of 2.5% on the issue price.

What’s the need for sovereign gold bonds?

It might be a bit amusing to know that India does not have gold reserves. Thus, the supply concerning the crazy gold demand needs to be imported. This does not imply any logistical issue. However, it does affect the macro fundamentals of our economy, directly impacting the country’s import bill. This has put a long-lasting impact on our currency as well.

Viewing such issues, the Government of India decided to issue sovereign gold bonds through our country’s central bank, i.e., the RBI.

Think of this as paper gold. While you cannot wear it to your favourite cousin’s wedding, you will get the same value from it in the long run, had you held on to gold in physical form. This is a win-win situation for both investors and the government. While you gain from gold price changes, the government can ditch worrying about substantial import bills.

How Do SGB Schemes Work and How to Apply for Them?

As the Reserve Bank of India issues these bonds, a specific window is set for subscriptions. Typically, the central bank announces the issue of the latest sovereign bonds through a press release every 2 to 3 months. Furthermore, investors are generally given a one-week window to subscribe to the SGB schemes.

To equate this investment, this bond’s face value is set following the current gold price.

Maximum limit4 kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities

The upper limit of subscription for SGB bonds is 4 kgs of gold, and the minimum subscription limit is 1 gram. After redeeming them, you get the market value of gold during that time.

Now, the cherry on the pie is the 2.5% interest that you get by investing in this scheme. This is one of the most exciting SGB features. So, in addition to capital gains, you also receive additional interest income annually.

How to buy Sovereign Gold Bonds?

You can easily apply for any one of the open SGB schemes through your bank or post office. But there’s an added bonus, when you apply through online platforms like Arihant Capital – you get a discount on the issue price of gold bonds! The issue price will be ₹50 per gram lower than its nominal value.

These bonds come with a maturity period of 8 years. However, you can choose to exit after five years and claim indexation benefit on your long-term capital gains. If you choose to stay invested for the entire tenure, know that the capital gains that you earn from your investment are tax-exempt.

Should you invest in Sovereign Gold Bonds?

If you are someone who stores gold jewellery or coins for your future generations, then know that the physical temptation of this precious metal is slowly reducing.

However, storing gold in non-physical form for years has undeniable value. It might not provide you with the kind of returns that other risky investment options do, but you can expect substantial capital appreciation and growth.

That said, investing in SGB schemes could be a perfect decision if you want to create a hedge against inflation. Additionally, you won’t have to pay any GST while purchasing Sovereign Gold Bonds, whereas you have to pay a 3% GST on physical gold purchases. This number could increase even further in the coming years.

While you might not consider this investment option as a ‘status symbol’, it can help you accumulate enough wealth for your future generations.

To apply for SGB online, contact Arihant at 0731-4217119 or email at

Wrap Up

Evidently, SGB schemes let you take advantage of consistent price rise in gold. At the same time, this investment option offers flexibility and liquidity while featuring support from the highest financial authority.

However, before making a decision, consider devising a strategic investment plan and analysing your financial goals. Also, you must follow RBI’s website periodically to get information regarding the release of Sovereign Gold Bonds.

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