SGB: To subscribe or buy in the secondary market?

The Reserve Bank of India (RBI) has recently launched the third series of Sovereign Gold Bonds (SGBs) 2023-24. This latest series is open for subscription until December 22, 2023. The bonds are priced at Rs 6,199 per gram of gold, but an instant discount of Rs 50 per gram is offered to those who apply online and pay through digital channels. New SGB series 2023-24 Series III 2023-24 Series IV Subscription date December 18-22, 2023 February 12-16, 2024 Issuance date December 28, 2023 February 21, 2024 Who should subscribe? Gold is appealing due to its tangible nature. It also has a traditional, cultural and historical value attached to it. That said, we, at Value Research, have never been a big advocate of investing in the yellow metal as it is not a wealth-generating asset. Gold has delivered only an 8 per cent return in the last decade, reinforcing its status as a not-so-good investment . However, it may shine during equity market crashes. Hence, sovereign gold bonds can be the best bet for those looking to protect their investments during such downturns. Choosing between new or existing SGBs: Which option is right for you? Now, when it comes to investing in SGBs, our readers often inquire about the best approach. Should they subscribe to newly issued SGBs or buy those already available in the secondary market? Let's explore. Existing SGBs already trading in the secondary market may be available at a discounted price. Since SGBs have an eight-year holding period and there are few buyers in the market, sellers may be forced to offer their investment at a lower price. Therefore, buying SGB from the secondary market may be a better idea. The current SGB prices are a testament to that. While the third series of Sovereign Gold Bonds (SGBs) 2023-24 are available at Rs 6,199 per gram of gold, you'd find bonds maturing around 2030-31 available at a lower price (see the below table). In some cases, you can buy the gold bond for as little as Rs 6,114 per gram! Other SGBs with near maturity SGB series Face value (R

This article was originally published on December 20, 2023.