Sovereign Gold Bonds: Modi govt offers money making chance; should you buy?

Sovereign Gold Bonds subscription: Prime Minister Narendra Modi approved the introduction of the Sovereign Gold Bonds (SGB) in September month of 2015 to reduce the demand for physical gold. Since then, the government in consultation with the Reserve Bank of India (RBI), has been issuing SGBs time to time. Now, the government has come up with the fresh tranche of SGB subscriptions. And this offers you a chance to make money without really having to worry about loss.

"Government of India, in consultation with the Reserve Bank of India, Sovereign Gold Bonds 2018-19 (Series IV) will be opened for the period December 24-28, 2018. The issue price of the Bond during this subscription period i.e. December 24-28, 2018, shall be Rs 3,119 (Rupees Three Thousand One Hundred Nineteen only) – per gram with Settlement on January 01, 2019, as also published by RBI in their Press Release dated December 21, 2018," said the finance ministry in a release.

There will a discount of Rs 50 per gram for those making the payment digitally.

"Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 3,069 (Rupees Three Thousand Sixty Nine only) per gram of gold," it said.

Anuj Gupta, Deputy Vice President - Research (Commodities and Currencies), Angel Broking Limited, told ZeeBiz.Com that investment in any form of gold, be it physical or SGB, ie expected to yield positive gains in near future.

"The gold prices are currently hovering around Rs 31,300 per 10 gram. Amid the global uncertainties, we expect the yellow metal to reach around Rs 33,000 in the next six month to one year time," said Gupta.

Since most of the demand for gold in India is met through imports, the SGB  scheme is aimed at helping in maintaining the country's Current Account Deficit within sustainable limits.

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Investors must note one fact and that is, the government had earlier said that the fluctuation in the prices of the metal will be borne by the Gold Reserve Fund. "The risk of gold price changes will be borne by the Gold Reserve Fund. The benefit to the Government is in terms of reduction in the cost of borrowing, which will be transferred to the Gold Reserve Fund," it had said.