Global gold prices have risen 20% in the last one year and are reaching a new high of approximately 39,000 INR.
Gold, typically, flourishes as a safe haven in times of uncertainty, where people are unsure of the movements in the Equity /Debt Markets. India is not immune to these conditions. “A number of global issues have surfaced such as the Iran conflict and trade wars, and gold serves as a store of value in such situations. With investor interest rising in the yellow metal, we tell you about some of the options available for investing.
Instead of going for physical gold investments, there are other ways of investing in gold like the Sovereign Gold Bonds, Golds Exchange Traded Funds (ETFs), Gold Monetisation Scheme, Indian Gold Coins, and Mutual Funds.
With the intent to provide gold-like returns, along with some interest, the government has launched the Sovereign GoldBond Scheme. Sovereign Gold Bonds (SGBs) were
introduced in tranches. The first tranche was offered in November 2015. In the financial year 2019-20, four tranches of SGBs will be issued every month from June 2019 to September 2019.
Price of SGB - The price of the Gold Bond is linked to Gold Prices. If the gold prices go up, then your bond value will increase and if not, then another way around. Gold Bonds are issued in multiples of 1 gram of gold. You can hold these bonds in paper physical form. The risks and costs of storage are eliminated. The risks and costs of storage are eliminated.SGBs bonds are free from issues like making charges and purity. These bonds are held in the Demat form, eliminating the risk of loss of scrip.
Interest Payments - Given that these are bonds i.e paper form of gold investments, an interest of 2.5% is paid semi-annually on the initial amount of investment. This Interest is taxable.
Eligibility - Restricted for sale to resident Indian entities, including individuals, HUFs (Hindu undivided families), trusts, universities, charitable institutions.
Investment Amount - Investors are required to buy a minimum of one gm of gold. The maximum limit that can be subscribed is four KG of gold for an individual in a financial year.
Tenure - The bond is of eight-year with an option to exit after the fifth year onwards. However, gold bonds can be transferred to the stock market.
Taxation - Capital gain tax arising on the redemption of SGB to an individual has been exempted. The indexation benefit will be provided to LTCG arising to any person on the transfer of bonds.
Where & How to Buy - Gold bonds can be bought through banks, post offices and the Stock Holding Corporation of India. They are available both in Demat and paper forms. Know-your-customer (KYC) norms are the same as those for the purchase of physical gold.
The main objective of the Sovereign Gold Bond Scheme is to reduce the demand for gold in the physical form by encouraging people to buy it in the paper form. The rate of interest for 2019–20 is fixed at 2.50 percent per year, payable on a halfyearly basis.
Wealth Cafe Actionable - Gold Bonds are a great form of Investments for individuals who want to make long term 'Investment' in gold for a period of more than 5 years and do not want to go through the hassle of purity, safety, and other risks.