Sovereign Gold Bond Returns
This news is no less than good news for those investing in Sovereign Gold Bond (SGB). Sovereign Gold Bonds of Series XIII of the year 2017-18 have recently matured and investors have benefited fully from the tremendous rise in gold prices. According to the final redemption price fixed by the Reserve Bank of India, this series has given an absolute return of about 380 percent, which has once again proved SGB to be a better option than physical gold.
Bond redemption at Rs 13563
RBI fixed the final redemption price for SGB 2017-18 Series XIII at Rs 13,563 per unit. This bond matures on December 26, 2025, the price was decided on the basis of the average price of gold of 999 purity in the three trading days immediately preceding the maturity. The sharp rise in gold prices in the domestic market in the last eight years was the biggest reason for this high redemption price.
At what price was SGB purchased?
When this sovereign gold bond was issued in December 2017, its issue price was kept at Rs 2,866 per gram. A little discount was also given to the investors who applied online, due to which they got this bond at Rs 2,816 per unit. At that time this price was considered quite attractive for common investors.
How much did investors gain?
Investors who bought this bond online and held it for eight years made a profit of more than Rs 10,700 per unit just because of the price rise. If seen in percentage terms, this amounts to an absolute return of approximately 380%. This return is entirely the result of the strengthening of gold prices.
Not only this, the biggest feature of SGB is that investors also get fixed interest of 2.5% every year, which is deposited in their account every six months. If this interest is added then the total return becomes even better.
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Why is Sovereign Gold Bond special?
Sovereign Gold Bond is issued by the Government of India and managed by RBI. It is considered a safe alternative to physical gold. In this there is neither any worry about keeping the gold nor any risk regarding its purity. Investors can keep it in paper or demat form and can also sell it on the exchange if needed.
What happens at the time of redemption?
Investors who hold the bond till maturity get the redemption amount directly in their registered bank account. Usually RBI gives this information to investors in advance. If someone has changed bank details or contact information, it is important to update it timely so that there is no delay in payment.
Things to keep in mind in SGB investment
The biggest risk in SGB is related to fluctuations in gold prices. If gold prices are low at the time of maturity, returns may be less. However, in the long run, SGB 2017-18 Series XIII has proved that both gold and sovereign gold bonds can prove to be extremely profitable for patient investors.