New Delhi: Finance minister Nirmala Sitharaman’s Budget 20204 announcement to reduce the duty on gold imports to 6 per cent from 15 per cent earlier. This has resulted in a major correction in gold prices, with 24 carat gold prices falling Rs 5,000 per 10 gm since the announcement.
SGB redemption rate tanks
This gold price decline has affected the redemption value of sovereign gold bonds (SGBs) by 2-5 per cent on the NSE.
The June 2030 maturity series’ redemption value was down 1.64 per cent to Rs 7,450 per unit on Friday.
The Feb 2029 series’ value was down 0.76 per cent to Rs 7,400.
The SGBDec2313 series, which is expected to mature in 2025, witnessed a 5.98 per cent decline in value to Rs 7,550. As of July 26, 2024, this value stood at Rs 7,350.66.
To be sure, the bond was issued at a price of Rs 3,119. The bond earned a bi-annual interest rate of 2.75 per cent.
The redemption rate is fixed on the last 3 days’ average closing price of 999 purity gold. This is shared by the India bullion and Jewellers Association.
How will gold prices affect SGB redemption?
According to Harshal Barot, senior consultant at Metals Focus, the change in gold prices will not affect the units that an investor had purchased while buying sovereign gold bonds. To be sure, there will be a correction in expectations, he said.
Further, future SGBs may be priced lower owing to the lowering in gold duty. According to Barot, gold duty changes are not a frequent occurrence, and this is unlikely to take away from the attractiveness of the yellow metal.
Sovereign gold bond: Next issue date
Sovereign gold bond issuance for the 2024-25 series has not been announced as yet but the Reserve Bank of India. Typically, RBI should have announced it in June 2024.
The last tranche of 2023-24 SGB series was issued in February 2024.
Sovereign gold bonds were started in 2015 by the RBI as an alternative investment avenue to physical gold buying.
It is a lucrative investment scheme in which investors earn an interest rate without the tension of storing physical gold.
Sovereign gold bond scheme investors are unhappy about the duty cut on gold since it may affect their redemption rate. So, should you continue to invest in SGBs? Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
