Sovereign Gold Bond scheme opens for subscription: Five things to know before you invest

The fourth instalment of the government-run Sovereign Gold Bonds (SGBs) scheme (2020-21) will open for subscription from today.

Issued by the Reserve Bank of India (RBI) on behalf of the government, the Sovereign Gold Bond Scheme 2020-21-Series IV,  will be open for subscription for five days from July 6 to July 10.

Here are top 5 things to know before you invest in the Sovereign Gold Bond Scheme 2020-21:

1. As per RBI's circular, the issue price for the Sovereign Gold Bond has been fixed at Rs 4,852 per gram of gold. Investors applying online and making payment through digital mode can avail a discount of Rs 50 per gram less than the nominal value. "For such investors, the issue price of the gold bond will be Rs 4,802 per gram of gold," the central bank said. "The nominal value of the bond based on the simple average closing price (published by the India Bullion and Jewellers Association) for gold of 999 purity of the last three working days of the week preceding the subscription period, works out to Rs 4,852 per gram of gold," RBI said in a statement on Friday.

2. Amid the coronavirus spread and easing of monetary policy across the world, investors have rushed towards the safe-haven asset, raising the demand for precious metal by over 20% since the beginning of the year in terms of value. Besides Covid-19, other global uncertainties like geopolitical and trade tensions have further yielded returns for gold investors. Of late, domestic prices of gold have been hitting new highs. Gold August Futures on MCX hit a record high of Rs 48,982 per 10 gram on Wednesday.

3. The fourth tranche of the scheme will be issued on July 14 and bonds will become tradeable on stock exchanges within a fortnight of the issuance on a date. The tenor of the Sovereign Gold Bond will be eight years, while buyers can also avail the exit option after fifth year.

4. An investor can buy SGBs through various modes like banks, designated post offices, Stock Holding Corporation of India, and through NSE and BSE. An investor can invest in a minimum amount of one gram of gold and a maximum of four kgs of gold. Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme. Gold bonds scheme will offer an annual interest rate of 2.50% to investors.

5. After the fourth tranche of the SGB scheme, the next scheme will open for subscription in August, followed by another one scheduled in September.

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