Sovereign Gold Bond early redemption opens for SGB 2020–21 Series X, returns top 175% as gold hits Rs 1.46 lakh

SGB redemption: Investors holding the Sovereign Gold Bond (SGB) 2020–21 Series X have received a major windfall, with the tranche opening for premature redemption after completing five years. Those choosing to exit now are sitting on gains of more than 175 per cent, driven by a sharp rally in gold prices over the past half-decade.

The Reserve Bank of India (RBI) has activated the early redemption window in accordance with the scheme’s rules, with January 19, 2026, designated as the eligible interest payment and redemption date. Under the SGB structure, investors can redeem bonds before the full eight-year maturity only after the fifth year, and only on dates when semi-annual interest is paid.

Redemption price

For this cycle, the RBI has set the premature redemption price at Rs 14,130 per unit. The price is calculated as the simple average of the closing price of 999-purity gold for the three preceding business days, as published by the India Bullion and Jewellers Association (IBJA).

Accordingly, gold prices from January 13, 14 and 16, 2026, were considered for the calculation. Once the redemption request is processed, the proceeds are credited directly to the investor’s registered bank account.

Nearly threefold increase

The SGB 2020–21 Series X was issued in January 2021 at a price of approximately Rs 5,117 per unit. At the current redemption price, investors are looking at a capital appreciation of nearly Rs 9,000 per unit, translating into gains of around 175 per cent purely from the rise in gold prices.

In practical terms, this means the investment value has almost tripled in five years. On top of this, investors have also earned 2.5 per cent annual interest, paid semi-annually on the issue price throughout the holding period.

For example, an investor who deployed Rs 50,000 at the time of issue would now receive close to Rs 1.38 lakh on premature redemption, excluding the cumulative interest payouts received over the years.

How to redeem early

Investors seeking premature redemption must submit their request through the bank, post office or authorised agent from whom the bonds were originally purchased. Requests typically need to be placed a few days ahead of the interest payment date to allow for processing.

Key conditions include:

Early redemption permitted only after five years

Redemption dates aligned with interest payment dates

Proceeds credited directly to the linked bank account

Tax treatment and scheme status

While the interest earned on SGBs is taxable, capital gains arising from redemption with the RBI are exempt from capital gains tax for individual investors. However, gains from selling SGBs on stock exchanges are taxable, with indexation benefits available for long-term holdings.

The Sovereign Gold Bond scheme, launched in 2015, has been discontinued for fresh issuances. In the Union Budget 2025–26, the government confirmed that no new tranches would be issued, citing the high cost of borrowing. Existing bonds, however, will continue until maturity or eligible redemption dates.

Gold and silver at record highs

The strong returns come amid a surge in precious metal prices. On major commodity exchanges, 24-carat gold recently traded at Rs 1,46,250 per 10 grams, while 22-carat gold stood at Rs 1,34,060. Silver prices touched Rs 3,05,100 per kg, delivering nearly 30 per cent returns in mid-January alone.

Market participants attribute the rally to heightened safe-haven demand, driven by geopolitical tensions and global economic uncertainty, reinforcing gold and silver’s appeal as portfolio hedges.

Aksha Kamboj, Vice President, India Bullion & Jewellers Association (IBJA) and Executive Chairperson, Aspect Global Ventures, said: "Gold is surging to fresh record levels as escalating trade tensions between the US and Europe intensify safe-haven demand. The sentiment is very supportive, even though the gold prices have rallied very quickly. However, gold is expected to remain at higher levels as long as concerns about geopolitical uncertainties continue to be prominent.:

For Silver, Kamboj said: "Silver is extending its powerful rally and touching new all-time highs. Silver is driven by the strength of gold as well as strong investment demand due to geopolitical tensions. Silver’s strength despite high levels of volatility suggests strong investor conviction, maintaining the overall outlook firmly positive for the short term."

“The rally is mainly attributed to strong global geopolitical uncertainty, supply-side concerns, a weakening US dollar, and robust industrial as well as investment demand. Additionally, precious metals received price support at higher levels due to the sudden imposition of tariffs by the US on a few European nations, following recent developments related to the Greenland issue,” said Satish Dondapati, Fund Manager at Kotak Mutual Fund.

He added that over the past year, silver prices have surged by more than 170 per cent, while gold has gained over 70 per cent. “Both metals are widely regarded as safe-haven investments, and silver, being an industrial metal as well, has an added advantage in the current macroeconomic scenario,” Dondapati said.