Listed gold bonds gain 65% in one year

The sovereign gold bonds listed on NSE has delivered a return of 8-12 per cent in the last one month on the back of sharp rally in gold prices. In fact, all the listed SGBs had gained 55 per cent to 65 per cent in last one year. This apart, investors would have earned an annual coupon of 2.50 per cent paid half yearly by the government.

The trading in the secondary markets started attracting investors interest after unrelented spike in gold price amid concern over economic growth wrecked by the Covid pandemic. Gold had a phenomenal run gaining over 36 per cent so far this year.

At year highs

The SGB maturing in February 2027 issued at ₹3,276 had hit a high of ₹5,295 on Tuesday despite profit booking in some of the bonds. In fact, drop in global gold prices on Monday has triggered profit booking in India.

Gold prices on Tuesday was down at ₹53,976 per 10 grams against ₹54,004 logged on Monday due to profit-booking. However, it had gained 10 per cent last month to ₹53,743 from ₹48,886 recorded on July 1.

SGB maturing in October 2023 issued at ₹2,906 had dropped by ₹160 to close at ₹5,340 a unit while bonds maturing in November 2025 VI and November 2023 are ruling at ₹5,211 (issued at ₹2,895) and ₹5,460 (issued at ₹2,684). They declined ₹149 and ₹19 on Tuesday on profit booking as the spot gold prices in global markets started falling.

So far this fiscal, government has issued series of 4 SGBs of 10.8 tonnes worth ₹5,112 crore much higher than ₹2,316 crore raised last fiscal. The fifth of the series, which is open for subscription at ₹5,334 per gram till August 7, is priced 15 per cent higher than ₹4,589 per gram fixed in April for the first SGB series in this fiscal. Sriram Iyer, Senior Research Analyst at Reliance Securities, said the bonds are good substitute for physical gold as investors are assured of the market value of the yellow metal at the time of maturity with periodical interest. However, the investors need to understand that there may be a risk of capital loss if the market price of gold declines, he said.

Since 2015-16, the government had come out with four SGBs and raised ₹14,765 crore. With the sharp rise in gold prices and close down of jewellery shops due to Covid pandemic, the government’s mop up through SGBs hit the highest-ever of 4.13 tonnes worth ₹2,004 crore last month.

Nish Bhatt, CEO, Millwood Kane International, an investment consulting firm said since gold is considered as hedge against inflation, it will remain in focus in the short to medium-term till clarity emerges on the virus and global growth trajectory

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