Despite stock market relief rally, the prices of sovereign gold bonds are steadily rising in the NSE, with the government opposing the issuance of fresh gold bonds.
Trading volumes have been weakened due to lack of awareness, but prices have risen between 5% and 7% over the past two months.
Prices have risen since the government introduced SGB in November 2015 as a replacement for physical gold.
Gold prices rose 14% to £8,772 on Monday from £7,658 on January 1st, despite touching £9,045 in the futures market. Globally, gold prices violate the historic $3,000 per ounce, trading at $3,100 per ounce.
Incidentally, the first SGB tranche was issued in November 2015 at a price of £2,684 per gram, and was redeemed for £6,132 in November 2023 after eight years of office. The final tranche of SGBS was issued in February 2024 for £6,262 per gram.
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According to the RBI report, the SGB scheme has raised 7,227 crores from investors and has been issued since 146.96 tonnes of gold was issued. Of this, the value of around Rs 1.12 lakh, worth 132 tons, is still held by investors. Of the 67 tranches issued, only six have been redeemed so far.
In addition to valuing the price, the initial investment in SGB achieved a fixed interest rate of 2.75% per year, and was later revised to 2.50%.
Tradejini COO Trivesh D said the uncertainty in the stock market and the decision to eliminate fresh SGB is boosting investors’ interest in this safe stock product in the secondary market.
With fewer bonds available and gold prices rising, these bonds are attracting more investors despite liquidity still being a challenge, he said.
Nikunj Saraf, VP of Choice Wealth, said the performance of existing SGBs is extremely strong as investors are looking for them, especially in light of gold’s robust performance under the current economic situation.
He added that demand for SGB is likely to remain strong as Gold is expected to continue its upward trajectory amid global uncertainty and weakening of the rupee.
Sriram BKR, senior investment strategist at Geojit Investments, said liquidity remains a concern for SGBS, but investors’ desire for gold could increase from a three-fold increase in gold ETFs year-over-year to 14,929 crore in the first 11 months of this fiscal year.
Investors who mature SGB will benefit most given the growing uncertainty in the global economy, he added.
