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Gold bond subscription ends today, issue price at discount to market prices

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The fifth tranche of gold bonds, which opened for subscription on Monday, ends today. The issue price has been fixed at 5,334 per gram. Those applying online and making payment online get a discount of 50 per gram. For such investors, the issue price of gold bond will be 5,284 per gram of gold.

The issue price is at a discount to current prices as gold has rallied sharply this week. According to India Bullion and Jewellers Association website, gold prices (999 purity) were near 5600 per gram (without GST and making charges) while in futures markets on MCX prices have crossed the 5600 mark.

The issue price of the latest tranche of gold bonds was fixed based on the average price of gold of 999 purity of the last three business days of the week preceding the subscription period (July 29 – July 31, 2020). The issuance date of this latest tranche of gold bonds will be August 11, 2020.

The latest gold bond offering comes at a time when gold price has surged about 43% this year.

Sovereign gold bonds are issued by RBI on behalf of the Government of India. Basically, gold bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold.

The September tranche of gold bonds (Sovereign Gold Bond Scheme 2020-21-Series VI) will open from August 31, 2020 till September 04, 2020.

The tenor of the gold bonds is eight years with exit option after fifth year. Gold bonds offer an annual interest rate of 2.50% to investors. Capital gains, if any, at maturity is tax-free. This is an exclusive benefit available on gold bonds.

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