Better Than Gold

For ‘investors’, sovereign gold bonds are easily the better option

- Jigar Pathak

Are you the kind who likes gifting gold during festi­ vals and weddings or regardless of occasion? Or someone who likes to buy gold bars and coins as an in­ vestment? If that’s the case, then consider a smarter al­ ternative. Starting 2015, the government began offering Sovereign Gold Bonds, or SGBs, that not only match physical gold in value terms, but also provide a fixed interest rate like any other fixed income bond.

“Buying Sovereign Gold Bonds is better than buying physical gold now,” says Brijesh Parnami, executive director and chief execu­ tive officer at Essel Wealth Services. “SGBs pay you an assured interest of 2.5 per cent over and above the price returns on gold.”

Handling physical gold, whether jewellery or bars and coins, is fraught with risk. “With SGBs, there is no problem of storage, no making or breaking charges, no need for any purity cer­ tificate,” adds Parnami. “Physical gold is highly susceptible to theft and burglary. With SGBs, your investment remains safe.”

THE FINER DETAIL

Parnami is referring to the dematerialised or demat form you can hold SGBs in, like shares you keep in a demat account.

Unlike lockers, where banks charge a fixed amount for storing physical gold, SGBs can be stored anywhere. The gold bonds also carry a sovereign guarantee, which means there is no risk of default on payment.

The SGB scheme allows one to purchase a minimum of one gram and multiples thereof, and a maximum of four kilograms of gold. SGBs can be purchased directly from banks, des­ignated post offices and recognised stock exchanges or indirectly through agents. Currently, the government is offering a discount of Rs 50 per gram to online subscribers.