Gold Investments Made Easy: How to Buy Bonds in 2023

Investing in gold can help to diversify your portfolio and counter the market risk. There are many ways to invest in gold; some are more efficient than others. One of the efficient ways is to invest in gold bonds. In this, you are given securities that act as a substitute for physical gold like jewellery and coins.

One of the gold bonds issued by the RBI on behalf of the Government of India is called the Sovereign Gold Bond or SBG. The gold in this bond is sold per unit and every unit derives its value from one gram of gold with 999 purity.

An average of the closing price of gold for the last three working days before the subscription period is taken to calculate the cost of gold. The closing prices are published by the Indian Bullion and Jewellers Association Limited (IBJAL). The redemption price is also taken from this source based on the latest base data.

Sovereign gold bond | Image Resource: appreciatewealth.com

Working of SBGs

The RBI issues SBGs in different periods during the financial year. They are made available through banks, post offices, brokers and online platforms. A discount of Rs. 50 per gram is offered when SBGs are bought online.

Investors can buy these bonds in the physical, digital or dematerialised format. When purchased physically the investors can make a request to get the bonds credited to their Demat account. The bonds are held in the RBI books until they are processed by the RBI. Investors who are not buying them for the RBI can buy these bonds from the secondary market (stock exchanges).

RBI is bringing a new series for SBG for sale in the market throughout the year. If you miss one you can look out for the next issue to be announced.

Advantages of SBGs

• These bonds are super safe and do not involve the risk of handling physical gold.
• Investors can earn an assured 2.50% interest on the issued price per annum.
• On SBGs, there is no tax deducted at the source.
• The price of SBGs is linked to the gold price of 999 purity.
• These bonds can be used as collateral when applying for a loan.
• The tenure of the bonds is eight years but offers the flexibility of redemption after 5 years with a sovereign guarantee on the redeemed amount and interest.

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