The government has announced a discount of Rs.50 per gram for investors who buy such units through online mode.
In a press release, the government said, “The Government of India in consultation with the RBI has decided to allow discount of Rs. 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of gold bond will be Rs.3,164 per gram of gold.”
IFAs registered on stock exchange platforms like NSE NMF II and BSE Star MF can earn commissions of up to 1% on sovereign gold bonds (SGBS) in the latest tranche of SGBS, which opens for subscription on January 14 and closes on January 18.
Only Indian residents can buy these bonds. SGBS will be issued in denominations of 1 gram of gold. Also, an individual cannot buy more than 500 grams of gold bonds per year. The issue price of bond would be Rs.3214 per gram. This translates to a maximum investment of Rs. 16.07 lakh a year at offer price.
These bonds will have a maturity period of eight years with a lock in period of five years. The government has linked the yield on these bonds to the international rate for gold borrowing. An indicative lower limit on such borrowing rate is 2% per annum. That means, investors will get an indicative return of 2% per annum along with the mark-to-market loss or gain.
In order to provide liquidity, the government has allowed the listing of these bonds on commodity exchange platforms which means that it can be traded on these platforms.
SGBS has an edge over gold ETFs. Firstly, there is no expense ratio in SGBS, which means there is no tracking error, like in the case of gold ETFs. Also, these bonds are expected to offer a minimum yield of 2% which is over and above mark-to-market value of gold.
Also, in a bid to make SGBS more attractive for investors, the government has made SGBS eligible for indexation benefits.
