Anybody invest in Sovereign gold bonds?

[CXO]

Hello CXO,

IMO, for people who are into SGB for Investment purpose only, nothing can beat SGB.

1. People investing in SGB knew that they have a 8 Year lock in for Zero LTCG.
2. The import duty cut has impact on Physical Gold as well.
3. Let's say if I have to buy a Physical Gold, I should have paid a minimum of 2% making charge for a Gold Coin and approx. 15% wastage if its a jewellery. On top of the wastage I had to pay 3% GST also. So overall 5% overpaid at the time of purchase incase of Gold Coin and around 20% overpaid if it is jewellery.
4. SGB pays back 2.5% yearly for 8 years.
5. SGB gives Rs.50 discount for online mode application which is approx 1% discount given the purchase made till 2020.
6. Zero LTCG after 8 years. (ETF / Gold MF has the Capital Gain tax added to it).
7. Incase if there is any emergency need of fund, i can anyday sell my SGB at Market price as it is in Demat form. (At the moment SGB's are trading with a premium of around 3 to 4 % in the demat market. So Market price sell is a steal.

Where do the SGB investors even loose out here.? Pls do explain with a small data point explaining why SGB is not the best Gold investment option and I will stand corrected.

Hi Rajagopalan,

Let's look at it another way, I don't disagree the level of difficulty/hassle of holding physical gold. BUT/IF the govt decides to stop issuing SGB, which it looks like it could, what is your proxy for holding gold? A physical gold holder does not worry about any change of stance by a govt. Gold is technically not controlled by any govt (as it is not issued by them either), as it has been for years.

Second, think about it from the borrower pov (i.e. from govt), why would the govt continue pay 12-15% return for holders, when it can issue a sovereign bond at 7.5% (pls check GSec category)? It is just not feasible for them.

Let's think for a minute on those lines, they never expected the price of gold to go up so much, so at the time of the launch, it was fine. With the prices continuing to go up, with geopolitical uncertainties and a looming recession - they will think twice now.

Again, take a case where govt does not do an SGB issue - then your option to use SGB is gone, you have to supplement it with something else right? Please think along the lines of asset allocation. If you have 5% or 10% allocation of your networth towards gold, then good. Now if SGB is stopped, you have to find an alternative for that. Physical gold, with its hassles is still best.

 

[sousnake]

Sgb is gone. Need to think beyond that now.

 

[sri_cc]

Sgb is gone. Need to think beyond that now.

what do you mean they're gone?

 

[sauravkumar]

what do you mean they're gone?

See understand bro.

Why Govt will pay 12-15% annually?? See in all govt instruments they are paying 7-8% but here in SGB they have to pay 12-15% CAGR annually.
So it's a big loss for govt.

It we see practically SGB is also a Bond only and never ever govt has paid and wants to pay 13-15% on a Bond. And moreover they have to 2.5 yearly interest.

That's why I was saying whoever invested in SGB are real intelligent people!!😤😤

And some idiots were crying that physical gold is best and blah, blah, blah... See that's the problem they don't have financial literacy. Nobody is saying here Gold is a bad investment. But you have to smart enough to choose what is the best option in all the better options.😑😑

Practically 15% CAGR and 2.5% yearly return that too with SOVEREIGN Guarantee... Nowhere in the world that is given.
So that's why Govt won't launch SGB now onwards.😔😔

 

[sousnake]

what do you mean they're gone?

Govt has not issued new sgb's from long time. Last issue was in Feb 2024. Generally in 1 fy there are 4 issues (jun, sep, dec, Feb/mar) but this hasn't happened in in this fy.
You can only buy from secondary market.

 

[Chacha_vidhayak]

What abt the people who invested recently in the feb month ?

 

[sauravkumar]

What abt the people who invested recently in the feb month ?

They are the luckiest one. 😁😁

They will get all the benefits of SGB.

 

[anisharya16]

Hi Rajagopalan,

Let's look at it another way, I don't disagree the level of difficulty/hassle of holding physical gold. BUT/IF the govt decides to stop issuing SGB, which it looks like it could, what is your proxy for holding gold? A physical gold holder does not worry about any change of stance by a govt. Gold is technically not controlled by any govt (as it is not issued by them either), as it has been for years.

Second, think about it from the borrower pov (i.e. from govt), why would the govt continue pay 12-15% return for holders, when it can issue a sovereign bond at 7.5% (pls check GSec category)? It is just not feasible for them.

Let's think for a minute on those lines, they never expected the price of gold to go up so much, so at the time of the launch, it was fine. With the prices continuing to go up, with geopolitical uncertainties and a looming recession - they will think twice now.

Again, take a case where govt does not do an SGB issue - then your option to use SGB is gone, you have to supplement it with something else right? Please think along the lines of asset allocation. If you have 5% or 10% allocation of your networth towards gold, then good. Now if SGB is stopped, you have to find an alternative for that. Physical gold, with its hassles is still best.

I don't want to argue/discuss more with you about this. I have already put up my points and you always keep saying after what happened in budget. I have already invested in SGB last year, will meet you after 8 years after maturity. I hope this community exists and you exists.

 

[sousnake]

I don't want to argue/discuss more with you about this. I have already put up my points and you always keep saying after what happened in budget. I have already invested in SGB last year, will meet you after 8 years after maturity. I hope this community exists and you exists.

But most important point is investment is something we do regularly/periodically
SGB can't be relied upon from this sense.

Its very good option but not reliable. It's like IPO based on luck and availability.
And no one considers IPO as investment.

 

[Chacha_vidhayak]

But most important point is investment is something we do regularly/periodically
SGB can't be relied upon from this sense.

Its very good option but not reliable. It's like IPO based on luck and availability.
And no one considers IPO as investment.

Agreed 👍🏻 bro …

 

[sunit123]

Second, think about it from the borrower pov (i.e. from govt), why would the govt continue pay 12-15% return for holders, when it can issue a sovereign bond at 7.5% (pls check GSec category)? It is just not feasible for them.

Govt is not doing any favour by paying 12%-15% return....Gold prices has increased...Govt introduced SGB with assumption that Gold prices will not increase or remain flat so instead of paying 8% on small savings scheme, they can borrow cheap @ 2.5%...Unfortunately, MASTERSTROKE became HIT WICKET

Secondly, to reduce payout of SGB, the custom duty is CUT which is very unfair....Now no one will trust Govt schemes, where the field is unfair and govt is twisting rules in its favour at its own discretion causing huge loss to investors

 

[anisharya16]

But most important point is investment is something we do regularly/periodically
SGB can't be relied upon from this sense.

Its very good option but not reliable. It's like IPO based on luck and availability.
And no one considers IPO as investment.

When you say no one considers IPO as investment, are you representing entire India?
Also I consider IPO as an investment.
Now, at present moment SGB might not be good after budget, I am not denying that. But pre-Budget, it was a good instrument. And people could diversify their portfolio.
Point: Hum Indians hai, hame jahan accha option milega wahi invest karenge. Ab ke time me SGB accha option nhi h to invest nhi karenge na hi dusre ko bolenge.

Aur SGB ka process ipo jaisa h, but ipo nhi h. If you apply for SGB, then you would get it.

 

[Rajagopalan]

Sgb is gone. Need to think beyond that now.

Hello, SGB is not yet done practically. You still have a secondary market to buy SGB with the expiry after 2028 so that it becomes Capital Tax free investment. Just note that there is a little premium on the trading price. But the 2.5% interest makes up for the premium.

With this, SGB becomes direct price relation with gold with the advantage of no Capital Gains after maturity. Still better than Physical Gold option as there is no Value Addition or GST involved.

 

[anisharya16]

Hello, SGB is not yet done practically. You still have a secondary market to buy SGB with the expiry after 2028 so that it becomes Capital Tax free investment. Just note that there is a little premium on the trading price. But the 2.5% interest makes up for the premium.

With this, SGB becomes direct price relation with gold with the advantage of no Capital Gains after maturity. Still better than Physical Gold option as there is no Value Addition or GST involved.

++Yes. Kaun samjhaye inhe?? smh

 

[Rajagopalan]

Hi Rajagopalan,

Let's look at it another way, I don't disagree the level of difficulty/hassle of holding physical gold. BUT/IF the govt decides to stop issuing SGB, which it looks like it could, what is your proxy for holding gold? A physical gold holder does not worry about any change of stance by a govt. Gold is technically not controlled by any govt (as it is not issued by them either), as it has been for years.

Second, think about it from the borrower pov (i.e. from govt), why would the govt continue pay 12-15% return for holders, when it can issue a sovereign bond at 7.5% (pls check GSec category)? It is just not feasible for them.

Let's think for a minute on those lines, they never expected the price of gold to go up so much, so at the time of the launch, it was fine. With the prices continuing to go up, with geopolitical uncertainties and a looming recession - they will think twice now.

Again, take a case where govt does not do an SGB issue - then your option to use SGB is gone, you have to supplement it with something else right? Please think along the lines of asset allocation. If you have 5% or 10% allocation of your networth towards gold, then good. Now if SGB is stopped, you have to find an alternative for that. Physical gold, with its hassles is still best.

Personally, I would make hay while the Sun Shines.! If any further SGB would be issued (which is the most possible case) or not is not of my concern as all I would want to do is find the best of whatever is available.

Example : Axis Magnus was good while it lasted. Similarly, just because the SGB party ended it doesn't mean SGB was bad.

Very importantly, the discussion is not about would SGB be issued or not and rather it was about choosing the best option in terms of returns for Gold investment. I recollect your posts mentioning SGB is not an alternate to Gold. In my opinion, it is a better alternative.

"Govt saved 9000 Crore by cutting import duties on SGB" is all about narrative setting that is being built, Illogically IMO as if the Physical Gold owned has Zero impact to it.! In fact, the bigger impact to the rate cut is to the physical gold only.

Even at the time of purchase, Physical Gold coin has 5% premium and Jewellery has 21.54%. But SGB saves 1% upfront with online purchase. Additional 2.5% fixed returns every year in addition.
What I fail to understand is how the import duty reduction is fully attributed to SGB's only. It has the same impact on the Physical gold. Understand, Government controls the import duty which impacts SGB's as well as Physical gold also.

I can safely say, I did not miss the SGB bus and it was all great till it lasted. I have got secondary SGB market to gain from till Feb 2028 for LTCG tax free returns of Feb'32 expiry.

Just because of the fact that after Feb'32 I don't have SGB, it doesn't make SGB worse in anyways as it gives much better returns today.

At Purchase
	SGB	Physical Gold - Coin (2% VA)	Physical Gold - Jewellery (18% VA)
Sep'20 Issue Price	₹ 5,117.00	₹ 5,117.00	₹ 5,117.00
Online Discount	-₹ 50.00	0	0
VA	0%	₹ 102.34	₹ 921.06
GST	0%	₹ 156.58	₹ 181.14
Per Gram Price	₹ 5,067.00	₹ 5,375.92	₹ 6,219.20
Extra Per Gram	-₹ 50.00	₹ 258.92	₹ 1,102.20
% Paid Extra	-1.0	5.06	21.54

 

[Rajagopalan]

But most important point is investment is something we do regularly/periodically
SGB can't be relied upon from this sense.

Its very good option but not reliable. It's like IPO based on luck and availability.
And no one considers IPO as investment.

Hello Sousnake,

https://sgbanalyzer.com/home

There is a whole new world here.! You can check this out if you would want to explore more if you are interested about SGB.!

 

[sauravkumar]

Personally, I would make hay while the Sun Shines.! If any further SGB would be issued (which is the most possible case) or not is not of my concern as all I would want to do is find the best of whatever is available.

Example : Axis Magnus was good while it lasted. Similarly, just because the SGB party ended it doesn't mean SGB was bad.

Very importantly, the discussion is not about would SGB be issued or not and rather it was about choosing the best option in terms of returns for Gold investment. I recollect your posts mentioning SGB is not an alternate to Gold. In my opinion, it is a better alternative.

"Govt saved 9000 Crore by cutting import duties on SGB" is all about narrative setting that is being built, Illogically IMO as if the Physical Gold owned has Zero impact to it.! In fact, the bigger impact to the rate cut is to the physical gold only.

Even at the time of purchase, Physical Gold coin has 5% premium and Jewellery has 21.54%. But SGB saves 1% upfront with online purchase. Additional 2.5% fixed returns every year in addition.
What I fail to understand is how the import duty reduction is fully attributed to SGB's only. It has the same impact on the Physical gold. Understand, Government controls the import duty which impacts SGB's as well as Physical gold also.

I can safely say, I did not miss the SGB bus and it was all great till it lasted. I have got secondary SGB market to gain from till Feb 2028 for LTCG tax free returns of Feb'32 expiry.

Just because of the fact that after Feb'32 I don't have SGB, it doesn't make SGB worse in anyways as it gives much better returns today.

At Purchase
	SGB	Physical Gold - Coin (2% VA)	Physical Gold - Jewellery (18% VA)
Sep'20 Issue Price	₹ 5,117.00	₹ 5,117.00	₹ 5,117.00
Online Discount	-₹ 50.00	0	0
VA	0%	₹ 102.34	₹ 921.06
GST	0%	₹ 156.58	₹ 181.14
Per Gram Price	₹ 5,067.00	₹ 5,375.92	₹ 6,219.20
Extra Per Gram	-₹ 50.00	₹ 258.92	₹ 1,102.20
% Paid Extra	-1.0	5.06	21.54

Very aptly and beautifully explained!!👌👌👌

Everything you explained logically and by giving example.👏👏

I was tired of explaining this to these people!!

A big thank to you!!👍👍

 

[theglobalinvestor]

I have one maturing end of this month.

SGB 2016-17 Series II
Face value ₹3150

 

[sousnake]

Hello Sousnake,

https://sgbanalyzer.com/home

There is a whole new world here.! You can check this out if you would want to explore more if you are interested about SGB.!

Didn't knew about that.. will surely check it.
Thanks bro

 

[sousnake]

Hello, SGB is not yet done practically. You still have a secondary market to buy SGB with the expiry after 2028 so that it becomes Capital Tax free investment. Just note that there is a little premium on the trading price. But the 2.5% interest makes up for the premium.

With this, SGB becomes direct price relation with gold with the advantage of no Capital Gains after maturity. Still better than Physical Gold option as there is no Value Addition or GST involved.

Bro wo samajh nhi aata, rate thik hai kya.
Via govt. issue it is very evident.
But will surely check it