Sovereign Gold Bonds: This SGB series will give over 159% profit at maturity on November 16

Sovereign Gold Bond (SGB): The final redemption date for the Sovereign Gold Bond (SGB) 2016-17 Series III is November 16, Saturday. Investors who own the SGB 2016-17 Series III, which was issued on November 17, 2016, will receive a redemption price of Rs 7,788 per gram.

According to a notification from the RBI issued on November 8, 2024, the redemption price for the last SGB redemption on November 16 is set at Rs 7,788 per unit of SGB. This price is based on the simple average of the closing gold price for the week of November 4 to November 8, 2024.

Those who purchased this bond at the original issue price of Rs 3,007 per gram in 2016 will realise a profit of Rs 4,781 per gram upon redemption. This equates to a return of approximately 159% on their investment over the eight-year period. Please note that this calculation does not include the annual interest rate of 2.50% paid biannually throughout the bond's duration.

Calculation of Redemption Price

The final redemption price is determined by the RBI using the average closing price of 999-purity gold for the previous week, as provided by the India Bullion and Jewellers Association Ltd. (IBJA). In the case of this particular tranche, the redemption price of Rs 7,788 was calculated based on the average gold price between November 4 and November 8, 2024.

The redemption price of Sovereign Gold Bonds (SGB) will be determined by calculating the simple average of the closing price of gold with 999 purity for the week (Monday-Friday) just before the redemption date. This information will be sourced from the India Bullion and Jewellers Association Ltd. on the specified date.

SGBs

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, offering an alternative to owning physical gold assets. Investors who purchase SGBs essentially acquire a bond representing a specific amount of gold, which is held for a period of eight years. This allows the value of the gold to appreciate over time without the need for physical storage.

The returns of sovereign gold bonds are boosted by both interest and the potential for capital appreciation. Interest will be distributed in semi-annual installments, with the last interest payment being issued alongside the principal upon the bond's maturity.

Since 2015, the central bank has issued a total of 67 Sovereign Gold Bond (SGB) tranches, totaling around 14.7 crore units. These SGBs are actively traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Amidst a lack of communication regarding the issuance of Sovereign Gold Bonds (SGBs) by the government in the current financial year, there has been a noticeable increase in demand for these bonds in the secondary market in recent months. The growing scarcity of SGBs is the main factor driving this surge in demand.
SGBs are designed for long-term investments lasting eight years, with a required lock-in period of five years. Redeeming is permitted by RBI at the end of the fifth, sixth, and seventh years post-issuance. The redemption process can be initiated by shareholders within designated timeframes through Receiving Offices, NSDL, CDSL, or RBI Retail Direct.