Sovereign Gold Bond Scheme 2021-22: To Buy or Not To Buy

The Government of India has announced the release dates of Sovereign Gold Bonds for 2021-2022 (SGB 2021-22). The bonds will be launched in six different series between May to September 2021. So should you invest in these or not? 

To start with, what are the different ways of investing in Gold. There are majorly two distinct ways.

1. Physical - The majority of us (at least in India) accumulate it in form of jewelry or gold coins. This is mainly done for consumption purpose or even for investment purpose in rural areas where access to banking is still not there, where these jewels are passed on to generations is sold only if all hell breaks loose.  

2. Electronic/Virtual - Now, there are multiple players in the market and various instruments wherein you can invest in electronic form. If you want to accumulate it, you can choose ETFs, SGB, or electronic gold facility offered through almost all of the wallets nowadays. If you want it only for speculative purposes, it can be done through your broker on MCX.

 

SGB 2021-22 Schedule

S. No.	Tranche	Subscription Date	Issuance Date
1.	2021-22- Series I	May 17-21, 2021	May 25, 2021
2.	2021-22 Series II	May 24 – 28, 2021	June 01, 2021
3.	2021-22 Series III	May 31 – June 04, 2021	June 08, 2021
4.	2021-22 Series IV	July 12-16, 2021	July 20, 2021
5.	2021-22 Series V	Aug. 09-13, 2021	Aug. 17, 2021
6.	2021-22 Series VI	Aug. 30- Sept.03, 2021	Sept. 07, 2021

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The first tranche is currently open for subscription at the rate of Rs.4,777/gm, while the market rate is currently hovering around Rs.4,854/gm (excluding GST). On online application, further Rs.50/- discount is there, making SGB a full Rs.127/- cheaper than the actual market rate for gold. So should we subscribe to the current issue of SGB, lets make sense of it. The minimum quantity to buy is 1gm and in multiples thereof.  

 

When To Buy

Gold offers a great hedge to inflation and mindless money printing that's going on currently and hence should be a part of everyone's portfolio. SGB offers one of the most convenient and lucrative option of holding gold. However, one should invest in this only if the ultimate goal is to accumulate gold for an event long down the line, say for a marriage. SGBs offer a tax-free (on maturity, interest is taxable) and risk-free way to accumulate gold if the requirement is at least eight years away. The fact that you get 2.5% interest (taxable) on the subscription value is a bonus.

 

When Not To Buy SGB

Those who want to accumulate gold for short term purposes, should not subscribe to these bonds. They are not liquid enough to sell in case the amount is required before maturity. So, if money is needed you may have to sell these at loss on exchanges. Also, the government provides the option to buy back these bonds after 5 years but in that case, the maturity amount will not be tax free. Hence for shorter tenure, ETFs are better. 

 

Where To Buy

SGBs can be subscribed bought from specific post offices, banks, SHCIL network or through your broker in the same way that you subscribe to an IPO. 

SGB Buying Tip

Do monitor various SGBs listed on stock exchanges, you may get better prices there. In any case, you have 5 days to subscribe to these bonds, it’s like having a Call option on gold without having to pay any cost. So, wait and keep looking for better prices on NSE/BSE and in case you don't get the opportunity, you can always subscribe on the last day. 

Also, you can use the interest received from SGB for further buying Gold ETF. This will further increase your returns over time. 

 

 

 

To subscribe to and purchase gold bonds you can open a demat account with Upstox by clicking here.

You can also purchase eGold or Gold MF through KUVERA, click here to signup.