InvestorQ : What are the key features of Sovereign Gold Bonds that actually makes it attractive for investors in gold?
Chandralekha Desai made post

What are the key features of Sovereign Gold Bonds that actually makes it attractive for investors in gold?

Dawn Cherian answered.
3 years ago

There are quite a few reasons why this Gold Bond Scheme is attractive to investors. Here are a few of them…

Firstly, you can hold the bonds in the form of physical certificates or even in your existing demat account. This becomes a lot simpler than holding physical gold considering the risk of theft, storage risks and risks of form conversion. In terms of convenience, the gold bonds are a lot more convenient compared to holding physical gold.

Secondly, and more importantly, these gold bonds pay an annual interest at the rate of 2.5%. This is an added kicker for gold bonds investors. When you buy gold in physical form you do not early any interest but you still incur storage and locker charges. In this case, you earn 2.5% interest each year plus you also get the benefit of gold price movement.

Gold bonds are extremely easy to buy. For example, you can also buy these Sovereign Gold Bonds through your existing online trading account. Additionally, there is an extra discount of Rs.50 per gram available to you in case you buy gold bonds online and also pay digitally. That enhances your yield on these gold bonds. This is in addition to the discount that is already offered on these gold bonds by the RBI. It is also easy as you can buy these gold bonds from any of your banks where the KYC is already done.

Gold bonds can be held in multiple names. The limit of purchase of gold bods is 4 KG per year per person. So if you are 6 members in your family then your household can actually buy up to 24 KG of gold each year. The limit is 5 times in the case of trusts formed for joint holding.

Since gold bonds are issued in minimum denominations of 1 gram of gold, then are within the reach of most middle-class investors too. It gives them a good opportunity to participate in gold as an asset class to hedge their overall portfolio risk. Also it is possible to buy these gold in affordable denominations.