Sovereign Gold Bond (SGBs) Scheme 2021-22 Series I Opens: Should You Invest And How?

Why Invest In Gold?

Gold from time immemorial has been considered a store of value which has over a period of time only appreciated in value. Last year only (2020) we saw gold clinching never before hit levels of Rs. 56,200 on the MCX. Now even as the gold prices have softened substantially from these levels, there still remains a bullish outlook for the bullion and most experts expect gold to hit Rs. 60,000 per 10 gm by the end of CY 2021.

Now given the bullish outlook, together with the gold's quality of diversifying your financial portfolio and also serving as an inflation hedge i.e. in all probability expected to edge higher amid the ample liquidity in the financial system, it would always make sense to lap up the metal for both capital appreciation and interest earnings (provided exceptionally in the case of SGBs)

Why invest in Sovereign Gold Bond (SGBs)?

With a sovereign backing this is the safe form of gold investment (SGBs being issued by the RBI on behalf of the Indian government) that unlike other gold investment modes such as gold mutual funds, gold ETFs neither entail volatility in NAVs but instead offers interest at the rate 2.5 percent that is payable half-yearly.

Other advantages of holding gold as SGBs in your portfolio are SGBs are free from risk of theft and also there is no purity issue with them. Further there is attached no storage cost. The only concern can be their long tenure of 8 years but the investment in SGBs can be liquidated after the 5th year of opening the account.

Not to forget, investors in SGBs also get taxation advantage i.e. in case the units of SGBs are held until maturity then any capital gains made on them will not attract taxation implication.

Should You Invest In Sovereign Gold Bond Scheme 2021-22 Series I?

Since its first launch in the CY 2015, the scheme is being notified every year and for the FY 2021-22, the government has announced its launch in 6 tranches. The Sovereign Gold Bond Scheme 2021-22 Series I is currently open until May 21, 2021 and the units under the same will be issued on May 25, 2021.

Here considering its current pricing or the issue price (SGB 2021-2022 Series I issue price), we will try and figure out whether or not you should opt for this latest investment that has opened up for taking position into the yellow metal gold.

Issue price of the SGB 2021-22 Series I has been decided at Rs. 4,777 per gram. While the spot gold prices are not available as the physical gold market is shut owing to the pandemic, on the MCX gold futures for June delivery quotes at Rs.47990 per 10 gm or Rs. 4799 per gm. So, this SGB issue price level is decided very close to the MCX gold rate and in fact buyers on online subscription to SGBs get a Rs. 50 discount for every gram of gold purchased that means the cost on buying 1 gm of SGB gold shall amount to Rs. 4727 per 10 gm this time.

Note the retail gold price is higher than the Gold MCX price by almost Rs. 1500 to Rs. 1800 per 10 gm. So, considering that gold rates in the retail market  shall still be on the higher side, current SGB 2021-22 Scheme Series I is available at a discount to customers.

Conclusion

The SGB price currently being offered in the SGB scheme 2021-22 (Series I) is a pretty decent price to get into gold investment in the current hour as on inflation risks and other economic and geo-political threats, gold shall most likely head northwards. Experts expect gold to scale to Rs. 50000 in price in the one month's time.

How To Buy Sovereign Gold Bonds?

Now as we recommend buying current SGB series on offer, here we tell you how you can buy the gold bond online amid the pandemic.

These bonds are primarily sold by scheduled banks except small finance banks and payment banks, Stock Holding Corporation of India Limited (SHCIL), recognised stock exchanges including BSE and NSE, and designated post office branches.

Now if amid the restriction in movement you wish to lap up SGB 2021-22 Series I, here's how you can buy it online supposing you maintain internet banking account with ICICI Bank:

Step 1: Login to your net banking account of ICICI Bank

Step 2: Go to Investments & Insurance

Step 3: Click on Invest Online

Step 4: Choose Sovereign Gold Bond and specify the quantity you wish to buy. Note SGBs come with a cap on the amount which can be bought by retail investors.

iMobile:

Step 1:Login to iMobile app

Step 2:Mutual Fund, Insurance & Tax Payment

Step 3: In the third step go to Sovereign Gold Bond and apply for its subscription. As you buy the bonds online you will get a special discount of Rs. 50 per gram.

GoodReturns.in