RBI's Sovereign Gold Bond:Preferred Way For Gold Investment During Global Crisis: Analyst

The conflict between Ukraine and Russia has driven gold prices to reach $1937/oz in the Comex futures on Wednesday. Gold has been gaining more importance in the international markets since the pandemic started. During a global financial or political crisis, commodity markets boom. Gold is one of the best examples of this. During 2008, at the time of the global financial crisis, gold rallied significantly. Now, at the time of the Russia-Ukraine war, again gold has glittered. Investors are flocking towards gold, comparing the yearly returns from gold and equities. In the past year gold has surged more than 10% in the future markets. In India, retail gold demands have also surged sharply.

There are multiple gold investment options like gold coin, gold jewellery, digital gold, RBI Sovereign Gold Bond, gold fund, etc. However, the SGB comes with added benefits of interest on investment and RBI's security. The RBI SGB prices are decided depending on the gold rates in the domestic markets in India. There is also no hazard of gold storage as the investors will be given a certificate against the gold investment.

Analyst's view

Vivek Bajaj, Cofounder StockEdge & Elearnmarkets commented, "The financial markets will continue to remain volatile due to the geopolitical crises. Gold is considered a hedging tool against inflation, and due to the conflict between Russia and Ukraine, inflation may rise in our country. Also, the Indian stock markets have been volatile due to ongoing tension between Ukraine and Russia. Thus gold is one of the alternative assets in which investors can invest in uncertain times as gold has a negative relationship with stock prices. When there is a rise in the prices of stocks, gold prices fall. On the other hand, when the stock prices fall, the gold prices rise. Also, in the event of the Russia-Ukraine conflict getting extended, inflation may increase."

Bajaj added, "One of the best ways of investing in gold is by investing in RBI's Sovereign Gold Bond schemes as it is a low-risk investment and the Reserve Bank issues it on behalf of India's Government. So, we can conclude that investors may invest in the Sovereign Gold Bond Scheme during this time of geopolitical crises and uncertainty in the market."