Gold bond investors to get 333% returns on December 2017 issue
In a move that is set to bring cheer to investors, the Reserve Bank of India (RBI) has announced that the final redemption price of ₹12,801 for Sovereign Gold Bonds (SGBs) under the 2017-18 Series-XI, which was issued on December 11, 2017. This means that investors who bought the bonds at ₹2,954 per unit will get a return of around 333%. This is a significant windfall for investors who had put their money into these bonds, and it highlights the potential of gold as a long-term investment option.
The SGBs were introduced by the government in 2015 as a way to reduce the demand for physical gold and to encourage investors to put their money into a more paper-based form of gold investment. The bonds are denominated in grams of gold, and they offer a fixed interest rate of 2.5% per annum. The bonds have a tenure of 8 years, with an option to exit after 5 years.
The fact that the final redemption price of the SGBs is ₹12,801, which is significantly higher than the issue price of ₹2,954, is a testament to the fact that gold has been a good investment option over the past few years. Gold prices have been on an upward trend, driven by a combination of factors such as inflation, currency fluctuations, and geopolitical tensions.
The RBI has also set the same price for premature redemption of the 2019-20 Series I SGBs, which were issued on June 11, 2019. This means that investors who had bought these bonds can now redeem them at a price of ₹12,801, which is likely to be higher than the current market price of gold.
The high returns on the SGBs are likely to attract more investors to this asset class. Gold has traditionally been a popular investment option in India, and the SGBs offer a convenient and paper-based way to invest in gold. The fact that the bonds offer a fixed interest rate of 2.5% per annum, in addition to the capital appreciation, makes them an attractive option for investors who are looking for a low-risk investment option.
The SGBs also offer a number of other benefits, such as tax benefits and liquidity. The interest earned on the bonds is exempt from tax, and the capital gains tax is also lower than what is applicable to physical gold. The bonds can also be traded on the stock exchanges, which provides liquidity to investors.
In recent years, there has been a significant increase in demand for gold, driven by a combination of factors such as inflation, currency fluctuations, and geopolitical tensions. This has led to a rise in gold prices, which has benefited investors who had put their money into gold-based investment options such as the SGBs.
The high returns on the SGBs are also likely to attract more investors to the bond market. The bond market in India has been growing rapidly in recent years, driven by a combination of factors such as the government’s efforts to develop the bond market and the increasing demand for debt securities.
In conclusion, the announcement by the RBI that the final redemption price of the SGBs is ₹12,801 is a significant development that is likely to bring cheer to investors. The high returns on the SGBs are a testament to the fact that gold has been a good investment option over the past few years, and they are likely to attract more investors to this asset class. The SGBs offer a convenient and paper-based way to invest in gold, and they offer a number of benefits such as tax benefits and liquidity.
As the demand for gold continues to grow, it is likely that the prices of gold will continue to rise, which will benefit investors who have put their money into gold-based investment options such as the SGBs. The government’s efforts to develop the bond market are also likely to lead to an increase in demand for debt securities, which will benefit investors who have put their money into bonds such as the SGBs.
Overall, the high returns on the SGBs are a significant development that is likely to have a positive impact on the investment landscape in India. As investors continue to look for ways to diversify their portfolios and to earn high returns, the SGBs are likely to become an increasingly popular option.
About the Author
