The Advantages Of Buying GIs it feasible for you to own gold through sovereign gold bonds as an investor? What are the advantages of this strategy? Let’s have a look. Let’s look at a clever technique to invest in gold:
Sovereign Gold Bonds. Indians are the world’s biggest gold buyers. This year’s gold imports have
outpaced the previous year significantly. We imported $5.11 billion worth of gold in September 2021 alone.
Our fascination with gold is multifaceted. It is a sign of status and a store of value; it signifies
generational wealth to be passed on; it is a sign of status. Gold jewellery is the most popular
ornament among Indian women. Gold is an ingrained part of our society that is difficult to shake.
Why did the RBI issue Sovereign Gold Bonds?
India, ironically, has no gold reserves at all. To accommodate this insatiable demand, all supplies
must be imported. This isn’t a problem with logistics. However, it impacts the economy’s macro
fundamentals and our total import bill and currency. To solve some of these difficulties, the Indian
government proposed issuing Sovereign Gold Bonds (SGB) through our central bank, the Reserve
Bank of India (RBI).
This is like gold on paper. While you won’t wear it to a wedding, it has the same long-term worth as
if you had maintained genuine gold. While you benefit from fluctuations in gold prices, the
government is spared the cost of a big import expense.
How Do Sovereign Gold Bonds Function, And How Do You Get Your Hands On Some?
The SGB is a bond issued by the Reserve Bank of India. The bond’s face value is fixed at the current gold price when issued to compare it to gold investment. Individuals can invest in a new series of SGBs that the RBI releases regularly.
Any open SGB issues can be applied for at your bank or post office. You can also apply through stock exchanges or online. The bonds have an eight-year maturity period. After five years, though, an early exit is also possible. Individual subscriptions have a maximum value of 4 kilograms of gold and a minimum value of 1 gram of gold. You will receive the market value of gold at the time of redemption. This is a scheme that the government has designed with individual investors’ interests in mind. It’s a way for you to profit from gold’s price fluctuation without having to deal with all of the
inefficiencies that come with buying actual gold. The cherry on top is the 2.5 per cent yearly interest
that the RBI will pay to bondholders every six months. You obtain a profit gain from gold investing
and an interest payment if you subscribe to bonds.
Furthermore, these bonds are listed and traded on stock exchanges, so you can sell them on the
secondary market before the term expires. However, you should only invest in Sovereign Gold Bonds
if you intend to retain them until maturity.
Are Sovereign Gold Bonds Right For You?
If you’re accumulating gold jewelry, bars, or coins for the next generation, keep in mind that the
allure of this yellow metal has waned with time. On the other hand, gold has obvious worth as a
store of value over years and decades. It may not provide the same competitive advantage as risk
assets, but capital safety and inflation-matching growth are expected.

Gold bonds are ideal if you want to add an inflation hedge to your long-term investment portfolio. If you’re saving for your next generation’s gold, this bond can act as a stopgap measure; timing your purchase so that the bond matures closer to the time you want to gift gold.
Another advantage of Sovereign Gold Bonds over actual gold is that you don’t have to pay any GST
when you acquire one. Otherwise, physical gold purchases are subject to a 3% GST. According to
several news sources, there is also speculation that this figure could rise to 5%.
This investment in the paper isn’t exactly a status symbol. Investing your collected assets in them, on the other hand, can help you pass on generational wealth to your children and grandkids.
Gold Bonds Taxation
According to your current tax bracket, the interest you earn on SGBs will be taxed. However, one
significant benefit is that the capital gains component is tax-free due to an increase in the price of
gold. SGBs offer some advantages over conventional gold investments in long-term holding and
capital gains tax.