Based on early data from a large study, the market price of gold fell after Pfizer announced that the experimental COVID-19 vaccine was more than 90% effective in preventing COVID-19.
With Dhanteras and Diwali imminent, everyone keeps in mind the purchase of gold, which is considered auspicious at the festival. Now that awareness of paper gold has increased, some people prefer it to physical gold. Against this background, a new series of sovereign gold coins (SGB) has begun. However, Tuesday's gold price was trading below the issue price of the latest SGB scheme. The issue price of the latest SGB scheme is fixed at Rs 5,177 per gram, with an online subscription offering a discount of Rs 50 per gram.
Based on early data from a large study, the market price of gold fell after Pfizer announced that the experimental COVID-19 vaccine was more than 90% effective in preventing COVID-19. Gold prices rise when there is uncertainty in the economy and the stock market. It hit a new high of Rs 56,200 in the futures market in August before some amendments were made. Gold prices fell below Rs 50,000 per 10 grams as Pfizer's update triggered global markets, including India. The stock market and gold are inversely proportional to price fluctuations.
So, the latest SGBs are trading at a higher price than the existing market price, so do you need to invest in it?
"SGB is an investment objective and the minimum investment period required for it is 5-7 years. Therefore, we continue to recommend investing in SGB as we get a guaranteed return of 2.5%. Currently, gold is bullish. As such, investors may invest in this product over a longer period of time, "said Angel Broking, Anuj Gupta- DVP- Commodities and Currencies Research.
Brokers expect gold prices to rise towards the 56,000 / 10gms mark by the next Diwali festival. "The fundamental boost to gold prices in the form of low-interest rates and unprecedented liquidity by central banks that keep gold prices rising," says Angel Broking Gupta.
If you're still worried about investing in an SGB that is higher than the market price, you can give this series a pass and invest in a gold ETF or gold mutual fund. In particular, the gold ETF category received a net inflow of around Rs 59.73 billion in September and Rs 38.42 billion in October. So far this year, this category has received a net inflow of Rs 6,341.2.
When to invest in SGB
The Reserve Bank of India issues a series of sovereign gold bonds on a regular basis during the fiscal year. This is the 8th series that started yesterday. The issue price of gold bonds can be higher than the existing market price, but there are two compelling reasons to invest in SGB.
Interest Income: The government gives a 2.5% interest on gold investments every six months. This interest income outweighs the price increases that occur in gold prices twice a year for eight years.
Tax-exempt returns: Whatever capital gains you earn on your investment, if you hold a gold bond to maturity, you will receive it tax-exempt along with your principal. Gold ETFs or investment trusts are required to pay an indexed 20% long-term (3 years later) capital gains tax and short-term (3 years ago) capital gains according to the income tax slab rate.
“Safety, liquidity, and returns are some of the key criteria that risk-averse investors look for before investing. Gold meets these criteria without major problems in the long run. You need to consider. If you are considering the digital mode, which is the cent of the gold portfolio as an asset class, you should choose SGB because it has the lowest transaction cost, "said Omkeshwar Singh, Head Rank MF of Samco Group. Says.
I agree with Adhil Shetty, CEO of BankBazaar.com. "The price of Sovereign Gold Bond is linked to the price of 24k Gold. The discounted price of Rs 5,127 for SGB's latest tranche is about the same as the price of 24k Physical Gold. SGB has a clear advantage over other forms of gold. Invest. You can choose to buy SGB, ETF, or MF based on your investment needs, investment duration, risk appetite, and budget. "
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