Every information you need before buying a gold bond
by Arjun Pal StudentAn SGB is government
security whose value is denominated in terms of the amount of gold that it
holds. They are alternatives for holding physical gold. If you wish to invest
in them you would have to pay the price, at which they are issued, in cash. You
can also redeem the bonds in cash when they mature. It is the Reserve Bank of
India that issues these gold bonds as a representative of the Indian
government.
What are
the advantages of investing in them rather than in physical gold?
For starters, your
investment in this case is always protected because no matter whenever you
redeem the same you would get the current market price of the gold. This
is applicable even when you go for premature redemption of the gold bond. So, this
is a major reason why sovereign gold bonds can be regarded as a much better
alternative than holding physical gold. You do not have to pay any money for
storing them and there are also no risks over here that you normally have when
you hold physical gold. Apart from being paid in terms of market price at times
of redemption, you can be sure that you would get periodic interest on the same
as well.
When you invest in
sovereign gold bonds you also do not have to worry about issues with the purity
of the gold and costs like making charges that are applicable for golden
ornaments.
What are
the risks of investing in these?
When you invest in
a sovereign gold
bond you need to be prepared for a capital loss in case
the market value of gold goes down at the time when you redeem the investment.
However, as an investor, you never lose the units of gold that you had paid for
when you bought the bond.
Who can
invest in these?
Every resident in
India can invest in these bonds. However, they must be qualified as such
according to the rules and regulations that have been mentioned in the Foreign
Exchange Management Act, 1999. Apart from individuals, HUFs (Hindu undivided
families), universities, trusts, and charitable institutions can invest in
these bonds as well. If an investor becomes a non-resident they can keep hold
of the bonds till the time it matures or if they redeem them before that. If
you wish to invest in these bonds it is always better to do so through the top
service providers in the domain such as ICICI Direct.
Disclaimer – ICICI Securities Ltd. ( I-Sec).
Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg,
Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor
to solicit bond related products. All disputes with respect to the distribution
activity, would not have access to Exchange investor redressal forum or
Arbitration mechanism. The contents herein above shall not be considered as an
invitation or persuasion to trade or invest. I-Sec and affiliates accept
no liabilities for any loss or damage of any kind arising out of any actions
taken in reliance thereon. Investments in securities market are subject to
market risks, read all the related documents carefully before investing. The contents
herein mentioned are solely for informational and educational purpose.
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Created on Nov 30th 2021 08:33. Viewed 227 times.