Why SGBs are burning bright and if it's a good time to invest in them

Sovereign gold bonds (SGBs) are shining brighter than ever. Not just because they are the safest mode of gold investment, provide tax-free returns on maturity and offer 2.5 per cent annual interest over and above the gold price. These features were already there. But because, despite the government's decision to reduce long-term tax on other gold investments, SGBs still remain the most tax-efficient option. What's more, the government's move to decrease import duty on gold from 15 per cent to 6 per cent should have dulled SGBs' shine, but it hasn't. It has only fuelled investor demand. The spike in demand is reflected in SGB prices. As of September 2, 2024, the 63 SGBs listed on the stock exchange are all trading above gold's market value of Rs 7,144 per gram. The premiums range from 1.48 per cent to 12.96 per cent, with gold bonds maturing at a later period being more expensive. For example, gold bonds maturing in over five years have a 9.4 per cent premium, while those maturing in three years average a 3.5 per cent mark-up. The ten most expensive SGBs The longer-maturing SGBs dominate the list  SGB Premium Maturity SGBFEB32IV 13% February 2032 SGBDE31III 12% December 2031

This article was originally published on September 04, 2024.