The second tranche of government-run Sovereign Gold Bond (SGB) scheme 2020-21 will open for subscription today.
Series II of the sovereign gold bond scheme will close for subscription on May 15. The issue price of the Series II has been fixed at Rs 4,590 per gram. This is the second tranche of the six tranches of Sovereign Gold Bonds issues announced by the government last month.
Amid the coronavirus lockdown, the demand for the precious metals is rising as investors have taken a backseat from equities in such a volatile market. The yellow metal is expected to trade as a safe investment during volatile times.
Here are 10 things to know about the latest Sovereign Gold Bond Scheme 2020-21 Series II:
1. The issue price of sovereign gold bonds is based on recent closing price of gold as published by the India Bullion and Jewellers Association Ltd for gold of 999 purity. "The nominal value of the bond based on the simple average closing price (published by the India Bullion and Jewellers Association Ltd) for gold of 999 purity of the last three business days of the week preceding the subscription period, works out to Rs 4,590 per gram of gold," RBI said in the statement earlier.
2. This is the second tranche of gold bonds of this fiscal year, issued by Reserve Bank of India (RBI) on behalf of the government. The first tranche of sovereign gold bond in the financial year 2020-2021 was open for subscription from April 20 to 24.
3. The first trance for the fiscal year saw a record subscription of 17.73 lakh units worth Rs 822 crore, the highest ever subscription since the October 2016 issue (35.98 lakh units of gold bonds issued worth Rs 1,081 crore), as per RBI data. The yellow metal was priced at Rs 4,639 for the first tranche of FY20.
4. Investors can buy the SGB schemes through commercial banks, post offices, stock exchanges Bombay Stock Exchange and National Stock Exchange, and the Stock Holding Corporation. Investors who can invest in the SGBs include individuals, trusts, charitable organizations, Hindu Undivided Families (HUFs) and universities.
5. The minimum investment limit in gold bonds is one gram of gold, where one unit of the bond is equal to one gram of gold. They have a maturity period of eight years, although investors can opt to exit after the fifth year.
6. The maximum limit of subscription shall be 4kg for individuals and HUFs, and 20kg for trusts and similar entities per fiscal year.
7. As per the RBI's directive, buyers applying online and making payment through digital mode will be provided with a Rs 50 discount.
8. Considered as a safe haven commodity, price of gold futures extended gains on the commodity exchange MCX and touched Rs 47K mark, on the back of spread of COVID-19 virus and the resulting lockdown.
9. RBI has also released a timeline of issuance of gold bonds for the first six months of the year. Following are the remaining gold bond schemes to be issued in the next four months:
2020-21 Series III : Subscription on June 08-12, 2020; Issued on June 16, 2020
2020-21 Series IV: Subscription on July 06-10, 2020; Issued on July 14, 2020
2020-21 Series V: Subscription on August 03-07, 2020; Issued on August 11, 2020
2020-21 Series VI: Subscription on August 31-September 04, 2020; Issued on September 08, 2020
10. SGB scheme was launched in November 2015 with an objective to shift the purchase of gold into financial savings. The yellow metal is considered to be less risky asset during times of economic turmoil.