Amid of Gold price volatility, should you invest in Sovereign Gold Bonds now..?

Updated: Dec 2, 2021

What is Sovereign Gold Bond..?

Sovereign Gold Bond(SGB) is digital gold bond issues by Reserve bank of India. SGB offers many benefits, including annual interest, tax benefits and easy-to-store option. Minimum Investment will be 1 gram of gold . Maximum subscription limit is 4 KG for Individuals. The tenure of the bond is eight years and, at maturity, investors are paid an amount equal to the one gram price of gold prevalent at that time. The gains are tax free if the SGBs are held till maturity.


Should you invest in gold Bonds..?

Gold prices have been extremely volatile in the last two years. After increasing in the first half of CY2019, they stagged from last year we have seen some correction as well. But these bonds for Long term investors who can hold for more than 5 years.

Ahead of festival season It is great chance to invest in SGB as demand piled up for festival and increase in inflation rates will trigger increase in gold price.


Can be Hedged with stock market investment:

We know that Gold prices will increase when economic growth is weak. Higher Inflation rates and Tapering are risks for stock market , As stock market falls gold price will increase .


Can be invested for portfolio diversification:

Investors may look for diversified portfolio after 18 months continuous rally, they may want to move the cash to less risk assets, in such options Gold is best. It is advisable to allocated 5-10% of capital in SGB, this way you can have diversified portfolio as well.


Conclusion:

SGB are best for long term investors who can hold till maturity, with low risk high liquidity. And the gains on SGBs are tax free, so you can grow your wealth tension free.




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FunTech Team


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