The Sovereign Gold Bonds Model & Salient Features of Investing In Gold Bonds

The demand for assets like sovereign gold bonds tend to rise significantly over time. Read this article by IIFL Finance to know the features before investing!

18 Dec,2016 07:15 IST 821
The Sovereign Gold Bonds Model & Salient Features of Investing In Gold Bonds

In the current volatile scenario having your investments diversified into a safe haven like Gold is a mandatory portfolio management practice. Keeping physical gold is preferred in form of jewellery but keeping investments in the yellow metal in physical form is both risky and purposeless unless you convert them into ornaments.

That’s where the Sovereign Gold Bonds come into play; they have all the traits of the physical gold apart from the physical form itself. It’s paper gold. They are backed by the government of India so needless to say they’re secured.

The Sovereign Gold Bonds Model

When an investor buys a gold bond he gets a paper against his purchase rather that the physical gold. Thereby, this already eases off the security concerns with the physical gold coin or bar. These can be also be transacted in the Demat form. Like the physical gold, one can use it as collateral for loans too.

Issue Price:

The price of the bond will be fixed in Indian Rupees on the basis of the simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited (IBJA) for the week (Monday to Friday) preceding the subscription period.

Payment Option:

Payment for the Bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

Interest Rate:

The investors will be compensated at a fixed rate of 2.50%/annum payable semi-annually on the nominal value of the investment.

Redemption Price:

The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

Salient Features of Investing In Gold Bonds:

Better Returns: Gold bonds along with price appreciation provide the investor with interest income.
Security: The demat or paper form of Gold Bonds help in making storing them conveniently.
Assured Purity and liquidity: Since they are backed by the government we can be assured of its quality and liquidity during early redemption.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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