In Mumbai, investors in Sovereign Gold Bonds are considering profit-taking as gold prices have reached ₹1 lakh per 10 grams on Monday, reflecting a 26% increase since January and a 33% rise over the past year. Those who invested in these bonds between May and October 2017, when gold was priced between ₹2,830 and ₹2,987 per gram, are now seeing absolute returns of 221% as their bonds near maturity. Similarly, investors who invested in April 2020 at ₹4,639 per gram could be eligible for buyback upon completing five years, resulting in a 101% return.
Sovereign Gold Bonds can be sold on stock exchanges or redeemed early through the government’s repurchase facility, available every six months after the fifth year. After eight years, the bonds mature, and investors receive their accumulated capital back.
Gold serves as a hedge against inflation and is considered a safe investment during geopolitical instability. Financial advisors recommend maintaining 10-15% of an investment portfolio in gold as part of asset allocation.
Nikhil Gupta, the founder of Sage Capital, advocates for Sovereign Gold Bonds as an optimal way to invest in gold. He notes that these bonds offer an additional 2.5% annual interest, a ₹50 discount on digital purchases, no storage costs, and tax-free capital gains at maturity. With new issues of Sovereign Gold Bonds halted by the government, Gupta advises investors, with gold allocations of 10-15% of their portfolio, to keep holding the bonds until maturity to benefit from these advantages. Those with a higher allocation in sovereign gold bonds are advised not to increase their exposure and, upon maturity, consider reallocating the proceeds into debt and equity investments.
