Buying gold is a tradition in India during the auspicious occasion of Akshaya Tritiya. With the lockdowns in place in many states due to the second Covid wave, buying gold in online formats – like Digital Gold, Gold Mutual Fund, Gold ETF, Sovereign Gold Bond etc – has gained traction.
However, the first tranche of Sovereign Gold Bond (SGB) for FY 2021-22 narrowly misses the golden opportunity of encashing the gold buying sentiment, with the subscriptions for 2021-22 Series opening on May 17, 2021, just three days after Akshaya Tritiya.
The subscriptions for 2021-22 Series will close on May 21, 2021 and the date of issuance of the bonds will be May 25, 2021.
As SGB is considered as the safest mode of gold investments due to no risk of theft/burglary, sovereign guarantee, interest on investment, tax-free maturity etc, it’s an attractive option for long-term investors.
It’s an ideal option for the people who need to buy gold at a future date, as they may redeem the bonds at a price equivalent to the price of gold on the date of redemption. So, they don’t have to worry about the price of gold in future.
With the restrictions on movements, the opportunity to subscribe in SGB would have been a good option for the investors looking to invest in gold online.
Although the issuance of SGB by the Reserve Bank of India (RBI) is not available on this Akshya Tritiya, investors may still buy the bonds, as they are available in the secondary markets.
To buy SGB in the secondary markets, you need to have a demat account.
Due to lack of liquidity, you may buy the bonds in the secondary market at a cheaper rate as well.
However, there are some drawbacks in buying SGB in secondary markets compared to investing in SGB directly when the issues are open for subscription.
Following are the disadvantage of buying SGB in secondary markets:
- The 2.5 per cent interest on the investment amount will not be available.
- The capital gains will not be fully tax free.