The fourth 21-22 gold sovereign bond issue was opened for subscription on Monday. The show was rated at ₹4,807 per unit, and there is a discount of ₹50 for those who buy these bonds online.
The issue price of gold bonds is calculated on the basis of the average price of the precious metal over the last three working days of the week preceding that of issue.
The issue price is based on 999 purity gold as declared by India Bullion And Jewelers Association Ltd. Each issue of gold bonds must be listed on the stock exchange within 15 days of the closing of the issue.
Now, if you compare the price of previously listed bonds with the current price of gold, you will notice that some bonds trade at a haircut, which varies between 1% and 3%, and could go up or down depending on demand. . for gold bonds.
“Gold sovereign bonds from previous issues are trading at a discount in the secondary market due to the downward trend in gold prices,” said Sugandha Sachdeva, vice president, commodities and currency research , Religare Broking Ltd.
“Right now, gold prices are down nearly 14% from their all-time highs, marked in early August 2020 amid global feelings of ‘risk’ in global and domestic markets, which have mitigated the appeal of the safe haven asset, ”Sachdeva added.
Buy Gold Bonds in the Secondary Market: Buying gold bonds in the secondary market is a good idea because you don’t have to wait for the issue to open and can spread your investments in a staggered fashion.
In addition, you can get the deposit at a reduced price. However, the discounts may not be very high.
If the price of gold falls below its issue price, one can buy the bonds at a lower rate in the secondary market and keep the average purchase price low.
“In addition, the investor gets an option to exit the position in small chunks, as needed against the five-year lock-in period for redemption applicable to the primary issue,” Sachdeva said.
However, to buy gold bonds in the secondary market, you will need a mat account.
In addition, liquidity could be a challenge. You may not be able to purchase large quantities if you want to.
In addition, attention should be paid to taxation when buying and selling gold bonds in the secondary market.
Capital gains on maturity of gold bonds are tax exempt, but if you sell the bonds in exchange, capital gains will be taxed at the rate of 20% with indexation after three years of holding. In addition, if the bonds are sold before three years, the gains will be added to the investor’s income and taxed according to the slab rate to which he belongs.
Gold bonds are considered to be one of the best ways to invest in gold because, besides capital appreciation, an investor can earn a fixed interest at the rate of 2.5% per annum on the amount invested.
Therefore, if you want to invest in gold for the long term, gold bonds are among the best options.
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