22 May
Date: 22-May-2021
Details of Sovereign Gold Bond 2021-22 Series II
Opens on: 24-May-2021
Closes on: 28-May-2021 Â
Issue price: Rs. 4,842 per gram
Discount: Rs. 50 per gram (if you apply online)
Net price after discount: Rs 4,792 per Gram
Yesterday, RBI concluded the sale of Sovereign Gold Bonds 2021-22 Series I. Series II will be up for the subscription from 24-May-2021. The price of Series I was Rs 4777/gram or Rs 4727/gram for online applications. The price of Series II is Rs 65/gram higher than Series I at Rs 4842/gram or Rs 4792/gram for online applications.
Sovereign Gold Bond (SGBs) are government securities denominated in grams of Gold. RBI issues them on behalf of the Govt. of India. They bear an interest @2.50% (fixed rate) per annum on the issue price.
RBI will issue Sovereign Gold bonds in six tranches in 1st half of 2021
| Sr. No. | Tranche | Subscription Period |
|---|---|---|
| 1. | 2021-22 Series I | May 17-21, 2021 |
| 2. | 2021-22 Series II | May 24-28, 2021 |
| 3. | 2021-22 Series III | May 31-June 04, 2021 |
| 4. | 2021-22 Series IV | July 12-16, 2021 |
| 5. | 2021-22 Series V | Aug 09-13, 2021 |
| 6. | 2021-22 Series VI | Aug 30-Sep 03, 2021 |
How is the issue price of Sovereign Gold Bonds decided?
Issue price of Sovereign Gold Bonds is fixed based on a simple average of the closing prices of Gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA), for the last three working days of the week preceding the subscription period.
Based on the average of the closing prices of 10 gram of Gold of 999 purity, 48177, 48534 and 48553, published by IBJA on 19, 20 and 21-May respectively, the price of SGB 2021 Series II is Rs 4842 / gram.
How is the price of Sovereign Gold Bonds decided on maturity?
Similar to the calculation method of fixing the issue price of Sovereign Gold Bonds, the maturity price of SGB will be a simple average of the closing prices of Gold of 999 purity, published by IBJA for the last three working days preceding the maturity date.
How buying Sovereign Gold Bonds 2021-22 Series I became lucrative?
The price of SGB 2021-22 Series I was Rs 4727 per gram for online applications. IBJA published the closing price of Gold of 999 purity as Rs 48553 for 10 grams on 21-May-2021. Thus, buying 10 grams of SGB on 21-May-2021 was Rs 1283 cheaper than buying 10 grams of physical Gold. Additionally, there is no GST on Sovereign Gold Bonds, whereas there is a GST of 3% on physical Gold.
Investment in Sovereign Gold Bonds offer three benefits:
- Appreciation potential, same as that of Gold
- An interest of 2.5% per annum on the issue price
- Capital gains are tax-free if you hold bonds till maturity.
Look out for the prices of Gold on 28-May. If the prices of Gold increase during the coming week, you might get a nice arbitrage opportunity in SGB and MCX.
Please read our previous blog to learn more about Sovereign Gold Bonds.
Happy investing.
Regards
Aashish Aggarwal
Director
TR Capital, Hisar
