Sovereign Gold Bond August 2020 (Series 5) – Who can invest?

Sovereign Gold Bond August 2020 (Series 5) - ReviewSovereign Gold Bond August 2020 (Series 5) – Who can invest?

Sovereign Gold Bond August 2020 (Series 5 of 2020-21) issue would open for subscription on August 3, 2020. Sovereign Gold Bond scheme 2020-21 Price is based on the average price of the preceding 3 days of the issue opening date which is fixed by Govt of India. SGBS offers Rs 50 per gram as discount to investors who invest online in demat form. In the article, I would provide details about Sovereign Gold Bond August 2020 (Series 5 of 2020-21) issue details and who can invest in these gold bonds now.

Also Read: Which are the high return investment options in India?

What are Sovereign Gold Bonds?

You can skip this section if you are already familiar about SGB.

Indians have been buying gold on all auspicious occasions, even though there is no requirement of gold considering the price appreciation in the future. In view of that, Govt of India has been issuing Sovereign Gold Bond Issue where one can invest in gold in grams, get interest every 6 months and also get the equivalent amount of gold amount on maturity. This is as good as investing in physical gold, but getting interest every 6 months in additional.

Sovereign Gold Bond August 2020 (Series 5) – Issue details

Sovereign gold bond 2020-21 dates (Series V) – 3–7 August.

These bonds are issued by RBI on behalf of the Government of India, hence are considered as one of the safest investment options.

These gold bond units would be issued on 11 August after subscription is closed.

These bonds would carry 2.5% interest rate per annum, which is payable every half year.

Sovereign gold bond August 2020 price is fixed at Rs 5,334. Investors who are investing in demat form would get a discount of Rs 50 per gram (Rs 5,284)

The sovereign gold bond scheme has a tenure of 8 years. However, one can exit from these bonds after 5 years from the date of subscription on interest dates.

These Sovereign Gold Bonds are issued in denominations of 1 gram of gold and in multiples of 1 gram.

Minimum investment is equivalent to 1 Gram of gold.

One can buy a maximum quantity of 4 Kg in a financial year, i.e. April to March period.

You can get a loan against the bonds as collateral from banks.

What are premature withdrawal rules of Sovereign Gold Bonds?

These gold bonds have a lock in period of 8 years. However, one can do premature withdrawal after completion of 5 years, but before maturity period that would be on the interest payment dates. If your interest payment date is 30 June, you can withdraw after 5 years and on 30 June or 31 December.

How the maturity amount is calculated for these gold bonds?

Since you are buying these bonds in grams of gold, on maturity, based on gold rate, equivalent amount would be paid to you. E.g. you would have bought 10 Grams of gold. The average prices of gold on maturity (during the previous week of maturity date) assume is Rs 5,000 per gram, you would get Rs 50,000.

How to apply for Sovereign Gold Bonds Aug 2020 issue?

The Bonds will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges i.e. NSE/BSE.

I would recommend you to buy through demat form so that everything is online.

Sovereign Gold Bond August 2020 (Series V) – Who can invest?

You are the best judge to check whether you can invest in these bonds based on your investment objective. Here are a few thoughts.

1) Investment purpose – Are you getting tempted with the gold price appreciation in the last 2 years. Then you should check gold price historical data. Between 2011 to 2017, the returns were smaller and below bank FD returns. Except for the gold price increase in the last couple of years, the gold price has not appreciated much in the last 10 years. Better to go for some of the balanced mutual fund schemes which can give you 12% to 15% annualized returns though not guaranteed.

2) Future Jewelry need – Are you planning to accumulate gold for utilizing them in the future. This could be for gifting ornaments to your spouse or accumulating gold for daughter’s marriage. If your answer is yes, indeed it’s one of the best investment options. Don’t think about 2.5% interest rate as these are small returns. No one can predict the gold rates in future. Hence, investing small amounts in such gold schemes can help you to accumulate gold grams over a period of time. Just ensure that you take out this atleast 1-2 years before your requirement and go for jewellery purchase.

Readers, what are your thoughts about this article. Do you have any different views about investments in gold?

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Suresh KP

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