Big gains in store for investors in gold bonds

NEW DELHI: Investors who have bought the first issue of sovereign gold bonds, up for premature redemption next month, are sitting on a gold mine.

When launched in November 2015, the price of gold was ₹2,684 per gram.

The current price is almost double at ₹ 5,135 per gram, according to the India Bullion and Jewellers Association ( IBJA).

Those holding them in a physical form or those who have bought them online and want to redeem these bonds before maturity will be able to do so now.

The redemption price will be based on the simple average of the previous week’s closing gold price of 999 purity published by the India Bullion and Jewellers Association.

At the current price, those who invested in the first issue are looking at an absolute gain of over 90% and an annualised gain of around 14% per annum over five years.

Moreover, over and above the capital gains, investors have earned an interest of 2.75% per annum— that’s ₹13,750 on gold bonds worth ₹1 lakh over five years.

Since these bonds are listed on stock exchanges, they may be traded anytime, butone needs to have a demat account to sell these bonds.

Experts believe the bull run in gold prices that started in July 2019 is likely to continue.

“Over the last couple of years, we have seen an upside of over 60% on gold. We continue to believe that the next couple of years are going to be very interesting for gold bulls, and the larger bias is likely to be on the upside. Although we are over with half the rally, the other half is likely to unfold soon,” said Navneet Damani, vice president, commodities research, Motilal Oswal Financial Services Ltd.