Gold Bond: As Gold Prices Shine, SGBs Attract Investors; Check Reasons

Invest In Gold: Gold has been a long-term performer. This is considered a reliable option for investment. It may not give sudden high returns like equity, but it is known to give stable returns in the long run. Its long-term returns have also been better than many asset classes. Not only in economic uncertainty but gold has also given high returns in the bullishness of stock markets. In such a situation, experts talk about keeping a 5 to 8 per cent allocation in gold in the portfolio. Some experts consider that the best option for investing in gold is the Sovereign Gold Bond because some of the benefits available in it make it unique.  

Why Invest in Sovereign Gold Bond?

Many Consider Sovereign Gold Bonds (SGBs) as the best option for investing in gold. In this, you get a 2.5 per cent annual additional return, and there is no capital gains tax. On redeeming it on maturity, you get returns at the rate of the price of gold of best purity at that time. The returns received on completion of maturity are tax-free. The tenure of these bonds is 8 years. But you can get out of it after holding for 5 years. This bond can also be used as collateral to take a loan.

The interest received on this is deposited in the investor's bank account on half yearly basis. However, this interest is taxable under the Income Tax Act, of 1961. The interest earned from gold bonds in a financial year is counted in the taxpayer's income from other sources. Tax is levied on the basis of which slab the taxpayer falls in. 

Cheaper than the market price, can buy even 1 gram

It is necessary to invest at least 1 gram of gold in Sovereign Gold Bond. Individuals are allowed to invest a maximum of 4 kg and entities like trusts are allowed to invest a maximum of 20 kg in gold bonds in one financial institution. At the same time, the price of gold bonds is less than the prevailing price of gold in the market. If you apply and pay online, investors get a discount of Rs 50 per gram i.e. Rs 500 per 10 grams.

also read: Gold Vs Sensex: Race Towards 1-Lakh Mark, Experts’ Bet And Suggestions For Investors

Gold: History of giving high returns in the long term

According to estimates, gold has been giving high returns in the long run. From 2010 to early 2024 i.e. during the last 15 years, it has given returns at 10 per cent CAGR. During this period, gold increased from around Rs 17,000 to Rs 71000 per 10 grams. That means there has been an increase of about Rs 54,000 per 10 grams of gold. 

Gold Prices can go up 

Talking to Outlook Money recently, Jigar Pandit, Head Commodity & Currency Business, Sharekhan by BNP Paribas said, that he expects the Rs 82,500 – Rs 85,000 range for gold in the medium to long term. Aamar Deo Singh, Sr. Vice President, of Research at Angel One Ltd. said that in the last 5 years, gold has outperformed the Nifty by almost 3 per cent. So, it is important for an astute investor to diversify his portfolio to invest in gold as well.