Best Sovereign Gold Bonds to buy from secondary market

Best Sovereign Gold Bonds to buy from secondary marketBest Sovereign Gold Bonds to buy from secondary market


Sovereign gold bonds are being offered in several tranches by Govt of India during the year. These are offered at Rs 50 lower price per gram which is approx. 1% lower than the issue price. Sovereign gold bonds would trade on the stock exchange like any other stocks as these are issued in demat account too. However, if you observe, some of the sovereign gold bonds are trading at lower prices on stock exchanges compared to current issue price. Some of you might be thinking to buy from the secondary market instead through regular bonds offered directly by Govt of India. However, many are making mistakes of buying bonds that provides low returns. Which are the best Sovereign Gold Bonds to buy from secondary market? Do lower price gold bond would give high returns?

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Quick overview about Sovereign Gold Bond Scheme

If you are already aware about these gold bonds, skip this section.

Sovereign gold bonds are issued by Govt of India.

These bonds are issued in the denomination of units. 1 Gram denotes 1 unit.

Govt of India is issuing these bonds in several tranches during the year.

These bonds have a maturity period of 8 years. However, one can do premature withdrawal after 6 years.

These bonds have interest rates of 2.5% per annum.

On maturity, the equivalent value of gold gram units would be credited to your bank account. Means there is no physical delivery of gold.

Sovereign Gold Bonds through regular tranche Vs Secondary market

When you buy these bonds directly during the subscription period, one can get Rs 50 off per unit. This is approximately 1% of the gold value (depending on the value of the unit value).

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However, when you buy from the secondary market, there is no such discount offered by Govt of India. However, these can be purchased from stock exchanges are rate which is being offered by selling holders of these bonds.

Here are the Sovereign gold bonds that are trading on October 19, 2020 and their market prices. We have taken out only where there are sales happening for such bonds beyond 20 units.

Symbol Last Traded Price
SGBSEP27 4,831
SGBJUL28IV 4,838
SGBJUN28 4,843
SGBAUG28V 4,845
SGBJAN27 4,850
SGBMAY28 4,853
SGBAPR28I 4,859
SGBMAY25 4,860
SGBSEP28VI 4,866
SGBMAR25 4,895
SGBSEP24 4,898
SGBMAY26 4,900
SGBOCT25IV 4,900
SGBNOV25VI 4,900
SGBAUG24 4,913
SGBMAR24 4,914
SGBNOV24 4,930
SGBFEB24 4,949
SGBDC27VII 4,980

If you observe, these bonds are trading at Rs 4,831 to Rs 4,980 per bond. The last bond price that was issued by Govt of India in Oct-20 tranche was Rs 5,051. Even we consider discount of Rs 50, investors has actually paid Rs 5,000. Can we straight away buy Rs 4,831 per bond from secondary market instead of buying from Govt of India? The answer is NO. Do you know that with this step, you would be getting 30% lower returns? One should not just look for market price alone. One should also look for the subscription price + interest payment which would be done in every 6 months. Lets keep an interest portion aside for the time being instead of complicating too much.

Let me explain with few examples.

1) You have bought sovereign gold bonds in last tranche (Oct-20) where it was offered for Rs 5,051. Assume you have invested Rs 5 Lakhs and you would have got approx. 100 units (before any discounts). You would get Rs 12,500 as interest on such bonds every year.

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2) Now let us assume you want to invest this Rs 4,831 (lowest) bond available damn cheap instead of investing at over Rs 5,000 direcly from GOI. Assume you have invested Rs 5 Lakhs and you would have got approx. 103.5 units. You would get Rs 10,065 as interest on such bonds every year. Why such a low interest is because interest is paid on subscription price and NOT on market price of these bonds. The subscription price of this tranche bonds are Rs 3,890 per bond, but trading at Rs 4,831 now.

This is approximately 25% lower interest what you would have gotten by going blindly with bonds from the secondary market.

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Best Sovereign Gold Bonds to buy from secondary market

One should mainly look for the subscription price. If subscription price is high, then interest is high. One can go for highest subscription price and lowest market price bonds.  All bonds issued during that year would have a similar maturity amount for that year (except for some variations).

Here is the list of Sovereign gold bonds that are being traded in secondary market now in 2020 along with their current market price, subscription price, maturity period and annualized interest one would get it. Depending on the tenure you want to buy you can choose the highest interest earned sovereign gold bonds for that period.

Eg.  If you want to invest for 7-8 years in these gold bonds from secondary market instead directly from Govt of India, you can choose Jul, Aug and Sep tranche bonds available now on the secondary market that are giving highest interest. If you see from below list, longer the tenure of bond, the higher is the interest rate.

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Symbol Last Traded Price Subscription price Annual Interest for Rs 5 L investment Maturity
SGBAUG28V 4,845 5334 13,762 Aug-28
SGBSEP28VI 4,866 5117 13,145 Sep-28
SGBJUL28IV 4,838 4852 12,536 Jul-28
SGBJUN28 4,843 4677 12,072 Jun-28
SGBAPR28I 4,859 4639 11,934 Apr-28
SGBMAY28 4,853 4590 11,824 May-28
SGBSEP27 4,831 3890 10,065 Sep-27
SGBDC27VII 4,980 3795 9,526 Dec-27
SGBJAN27 4,850 3164 8,155 Jan-27
SGBSEP24 4,898 3150 8,039 Sep-24
SGBAUG24 4,913 3119 7,936 Aug-24
SGBMAY26 4,900 3064 7,816 May-26
SGBNOV24 4,930 2957 7,497 Nov-24
SGBOCT25IV 4,900 2937 7,492 Oct-25
SGBMAY25 4,860 2901 7,461 May-25
SGBMAR24 4,914 2916 7,418 Mar-24
SGBMAR25 4,895 2893 7,388 Mar-25
SGBNOV25VI 4,900 2895 7,385 Nov-25
SGBFEB24 4,949 2600 6,567 Feb-24

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Suresh KP

15 comments

  • Deepak P

    Hi Suresh,

    If you could provide me latest details or shall I still consider buying SGBAUG28V (Rs. 4812)

    Or Shall I go for latest SGB Scheme 2020-21-Series VIII, which opened for subscription on November 9, has been fixed at Rs 5,177 per gram with a Rs 50 per gram discount for online subscription.

    Regards,
    Deepak P

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