Sovereign Gold Bonds are a safe and secure investment that you can make with your hard-earned money. You invest in Sovereign Gold Bonds by purchasing them for a specific amount of money and receiving a return when the bonds mature and are redeemed.
What are Sovereign Gold Bonds?
The primary benefit of investing in sovereign gold bonds is that they offer a higher rate of return than other fixed-income instruments such as government bonds. For example, the interest rate on the 10-year sovereign gold bond is currently 2.50% per annum. In comparison, the yield on 10-year government bonds is around 1.50% per annum.
Another advantage of sovereign gold bond is that they provide investors with a convenient way to invest in gold without having to take physical possession of it. This is especially important given the current Covid-19 pandemic which has made it difficult for people to buy and sell gold bullion.
Finally, sovereign gold bonds offer investors protection against inflation. This is because the value of gold tends to go up when inflation rates rise. By investing in sovereign gold bonds, investors can safeguard their wealth against inflationary
The Risks of Sovereign Gold Bonds
When it comes to investing in gold, there are a variety of options available. One option is to invest in sovereign gold bonds. Sovereign gold bonds are issued by the government and backed by gold reserves. While these bonds offer a number of benefits, there are also some risks to consider before investing.
One of the biggest risks associated with sovereign gold bond is that they are subject to interest rate risk. This means that if interest rates rise, the value of the bond will fall. For this reason, it’s important to keep an eye on interest rates when considering investing in these types of bonds.
Another risk to consider is credit risk. This is the risk that the issuer of the bond will not be able to make payments on the bond. This could happen if the country experiences economic difficulties or if there is political instability. Before investing in a sovereign gold bond, it’s important to research the creditworthiness of the issuing country.
In addition, sovereign gold bond are also subject to market risk. This means that their value can go up or down based on general market conditions. Gold prices can be volatile, so it’s important to monitor them closely if you’re considering investing in these types of bonds.
How to Invest in Sovereign Gold Bond
Eligibility:
The bonds are open for subscription to all resident Indian citizens and Hindu Undivided Families (HUFs). NRIs and PIOs are not eligible to subscribe to the bonds.
Minimum and Maximum Limit:
The minimum limit for investment in the bonds is 1 gram, while there is no maximum limit.
Pricing:
Interest: The interest income is tax-exempt in the hands of investors. It is taxable in the hands of the investor if he has not acquired these bonds under the Portfolio Investment Scheme (PIS). However, the capital gain arising out of the transfer of these bonds will be exempt from tax.