The fifth tranche of government-run Sovereign Gold Bond (SGB) scheme 2020-21 opened for subscription today. Series V of the sovereign gold bond scheme will close for subscription on August 7.
Demand for gold has surged about 37% this year as investors take a backseat from equities in a volatile market. The rally is expected to continue, as per bullion experts.
Here are the top 10 things to know before you invest in the Sovereign Gold Bond Scheme Series V- 2020-21:
1. As per RBI's circular, the issue price for the Sovereign Gold Bond has been fixed at Rs 5,334 per gm. "The nominal value of the bond based on the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period; works out to Rs 5,334 per gram of gold," the RBI said.
2. This is the fifth tranche of gold bonds of this fiscal year, issued by Reserve Bank of India (RBI) on behalf of the government. The first tranche of sovereign gold bond in the financial year 2020-2021 was open for subscription from April 20 to 24. The issue price for the fourth series of gold bonds that was open in July was Rs 4,852 per gram of gold.
3. Investors can buy the SGB schemes through commercial banks, post offices, stock exchanges Bombay Stock Exchange and National Stock Exchange, and the Stock Holding Corporation. Investors who can invest in the SGBs include individuals, trusts, charitable organisations, Hindu Undivided Families (HUFs) and universities.
4. The gold bonds are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions. The minimum investment limit in gold bonds is one gram of gold, where one unit of the bond is equal to one gram of gold. They have a maturity period of eight years, although investors can opt to exit after the fifth year.
5. The maximum limit of subscription shall be 4kg for individuals and HUFs, and 20kg for trusts and similar entities per fiscal year.
6. As per the RBI's directive, investors applying online and making payment through digital mode can avail a discount of Rs 50 per gram less than the nominal value. "For such investors, the issue price of a gold bond will be Rs 5,284 per gram of gold," the RBI said.
7. The 2020-21 Series V subscription will be open for subscription between August 3-7, 2020 and will be issued to investors on August 11, 2020.
8. Earlier in April, the central bank RBI had announced the government will issue Sovereign Gold Bonds (SGBs) in six tranches beginning April 20 till September. The 2020-21 Series VI subscription will be between August 31-September 4, 2020, and will be issued to investors on September 8, 2020.
9. Considered as a safe haven commodity, price of gold futures extended gains on the commodity exchange MCX and touched Rs 53K mark on the back of spread of COVID-19 virus and the resulting lockdown.
10. SGB scheme was launched in November 2015 with an objective to shift the purchase of gold into financial savings. The yellow metal is considered to be a less risky asset during times of economic turmoil. Gold bonds offer an annual interest rate of 2.50% to investors.
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