Sovereign Gold Bond opens on 31 August (Series VI) – issue price fixed at Rs 5,117




Sovereign Gold Bond August 2020 (Series 5) - ReviewSovereign Gold Bond opens on 31 August (Series VI) Issue Details


Sovereign Gold Bond September 2020 (Series 6 of 2020-21) issue would open for subscription on August 31, 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 September 2020 (Series VI of 2020-21) issue details and who can invest in these gold bonds now.

Also Read: Why gold prices are increasing now 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 September 2020 (Series VI) – Issue details

Sovereign gold bond 2020-21 dates (Series 6) – 31 August to 4 September

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 September 8, 2020 after subscription is closed.

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

Sovereign gold bond September 2020 price is fixed at Rs 5,117. Investors who are investing in demat form would get a discount of Rs 50 per gram.

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 30th June, you can withdraw after 5 years and on 30th June or 31st 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 5,500 per gram, you would get Rs 55,000.

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 and you also get Rs 50 discount per gram.

Sovereign Gold Bond September 2020 (Series VI) – Who can invest?

We have provided our view earlier. You are the best judge to check whether you can invest in these bonds based on your investment objective.

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.

Also Read: How to achieve financial freedom faster?

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 withdraw such money 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

9 comments

  • Sreenivasan

    sir, this is well written and simple to understand, appreciate it.

  • HEMANT BHATIA

    Recently there was issue of gold bonds,which closes on 7th August, where in the issue price was 5334(After discount 5284). This is available in secondary market at 4895, so why then one buy this new series at higher price ? Further on that series, one will get interest on 5334 ,where as here it will be on 5117 .

    • You are 100% right. If these bonds are available at lower rate, one can buy from stock market directly. One should note that the price on stock exchange would depend on number of sellers who are willing to sell them at lower rate. Just because one day the price is low (which seller would have sold for need of urgent money), it does not mean that these are available at cheap on stock exchanges. If you think there are sellers at lower rate, your priority is to buy on stock exchange itself.

  • Binil

    Hi Just wanted to understand does the Govt buy gold as the underlying security/collateral with the money invested by investors. What does the Govt stand to gain by launching this scheme. Reduced import of Gold

    • Hello Binil, Except for reducing import of gold, there is no other motto from government of India. Even from investor point of view, they don’t need physical gold immediately. If any one want immediate gold, they would anyways buy gold. Whoever feels gold is required in future for their personal purpose, would worry about price increase and generally purchases and keep them in the locker. Such investors would benefit with such bonds as they would get interest in addition to getting value of gold on maturity.

  • J JAIKUMAR

    I want to invest in SGB for saving for my daughter”s wedding which is years later. The problem is if i invest in SGB will i not lose contunity as after the seventh year it gets matured and am forced to wait for the next tranche. How to have contunity. I dont want to leave sgb as i get that interest

    • Jaikumar, there is no choice. If your daughter wedding is say 16 years, on current SGB maturity, you need to reinvest for next tranche so that you get money at 16 years. Consider taking this in demat form to do faster transactions

  • Nirjhar

    Helo Sir, Please make some video on two things

    1. How to invest in real state online like which builders offer real state deals online and secure to buy from there.
    2. When markets are touch new heights, Gold is at high level where is the value now and which invest option is available for cheap.

    Regards
    NJ

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