Sovereign Gold Bond Tranche 2 Opens with Online Discount
MAS Team | 13 September 2023
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The second tranche of the sovereign gold bond scheme for 2023 has kicked off and will continue to accept subscriptions until September 15, 2023. This presents an opportunity for investors keen on participating in this government-backed gold investment scheme, with the added advantage of an online application discount.
 
The Reserve Bank of India (RBI) recently unveiled the price of the sovereign gold bond, setting it at Rs5,923 per gram. Additionally, the central bank has introduced a special incentive for online applicants, offering a discount of Rs50 per gram. For those opting for online application and payment, the issue price effectively becomes Rs5,873 per gram.
 
Investors who choose to participate in this RBI-backed scheme enjoy several advantages. First and foremost, they receive the value of their gold weight at the time of redemption. On top of this, the scheme offers an attractive 2.50% per annum additional income. This means that if an investor subscribes to one gram of gold today, the cost will be either Rs5,923 (offline) or Rs5,873 (online). Given the eight-year tenor of the sovereign gold bond, the redemption amount will be based on the prevailing one-gram gold price at the time of maturity.
 
Gold prices have displayed resilience, albeit slightly below the record highs of Rs61,845 per 10 grams experienced in the second quarter of 2023. As India approaches the wedding and festival season, traditionally marked by high gold demand, the precious metal is poised to regain the spotlight.
 
Factors to consider before investing in gold:
  • Central Banks' Gold accumulation: Central banks worldwide are amassing substantial gold reserves as a hedge against economic uncertainties and a movement away from the US dollar, signifying their trust in gold as a safe haven asset.
  • Expected end of US Rate Hikes: Markets anticipate that the US central bank is nearing the conclusion of its interest rate hike cycle. This is typically favorable for gold, as higher interest rates can weigh on its prices.
  • Global Economic Concerns: Lingering concerns about a weakening global economy continue to enhance gold's appeal as a safe haven. Gold is often viewed as a safeguard against inflation and economic instability.
  • Correction in Gold Prices: Following the peak of Rs61,845 per 10 grams, gold prices have corrected and consolidated around the near-term support zone of Rs57,500-58,000 per 10 grams. This presents a strategic opportunity for investors to gradually incorporate gold into their portfolios, particularly if they have a long-term investment horizon.
 
In conclusion, the sovereign gold bond scheme's second tranche offers investors an attractive pathway to gold investment, coupled with the convenience of an online application discount. As gold continues to shine as a safe haven asset amid global economic dynamics, this offering could be an appealing addition to diversified investment portfolios.