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Sovereign Gold Bonds Gain Momentum
Aug 10, 2016


The Sovereign Gold Bond (SGB) Scheme was launched in November 2015 to quench the country's insatiable affinity for the yellow metal and thereby curb its import. Starting with a lukewarm response, the demand for SGBs has slowly gained pace. Benefits such as low expense ratio, annual interest income of 2.75%, and exemption from capital gains tax if held for the full term of eight years make it score over the gold Exchange Traded Funds (ETFs). Therefore, since their launch, SGBs have garnered Rs 22.9 billion in four tranches whereas gold ETFs have seen an outflow of Rs 9 billion over the same period.

Moreover, as the fourth tranche of SGBs was distributed through the stock exchange platform of the BSE and NSE, higher participation by retail investors led to a spurt in demand. Even firm gold prices resulting in a 20% appreciation in the bond value has further added to its attraction. SGB is definitely a more tax efficient and profitable vehicle to invest in gold with the added advantage of not having to bother or spend to keep it safe. However, steps such as distributing the bonds through the more ubiquitous post offices as well as selling the bonds on-tap rather than for limited time period will go a long way in making the scheme a bigger success.

Data Source: Economic Times, Ministry of Finance

This Chart Of The Day was published in The 5 Minute WrapUp - Stock Operators, Paneer Tikka, and the Giant Economic Cauldron!

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