In­vestors Likely to Ditch Bank Sav­ings for Gold Bonds

The Economic Times - - Finance & Commodities - Su­tanuka.Ghosal @times­group.com

Kolkata: The sev­enth tranche of sov­er­eign gold bond (SGB) is ex­pected to re­ceive good re­sponse as the money de­posited in banks dur­ing the de­mon­eti­sa­tion drive is likely to be pumped into this scheme, reckon mar­ket­men and an­a­lysts.

The scheme is hit­ting the mar­ket af­ter a gap of four months, and is the first af­ter the gov­ern­ment’s note-ban ini­tia­tive. Also, it is priced nearly 1.7% cheaper than the pre­vail­ing gold rate in the mar­ket.

“Gold is one of the best per­form­ing as­set classes in 2017 and the yel­low metal has gained in­vestors’ in­ter­est once again. De­ma­te­ri­alised, trade­able and in­ter­est bear­ing make SGB an ex­cel­lent in­stru­ment. It is def­i­nitely bet­ter than bars and coins,” said Shekhar Bhan­dari, busi­ness head for global trans­ac­tions and pre­cious metal at Ko­tak Mahin­dra Bank.

Gold has ap­pre­ci­ated by al­most 9% since the begin­ning of this year. To­tal in­vest­ment de­mand for gold in 2016 de­clined by 17.1% to 161.5 tonnes, ac­cord­ing to World Gold Coun­cil. The sev­enth tranche of SGB opens on Mon­day and closes on March 3, and the bonds will be is­sued to el­i­gi­ble ap­pli­cants on March 17. The bond of­fers a 2.5% in­ter­est per an­num to in­vestors.

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