GOLD
Basics
- Issued by RBI on behalf of government of India
- Sovereign guarantee
- It is a substitute for holding physical gold
- Minimum investment is 1gm and maximum is 4 KG
- Investments & redemptions cannot be in the form of gold.
- SGB have a interest rate of 2.5% p.a. payable semi annually.
- Tenure of the bond is 8 years
- Premature redemption is allowed from 5 th year and on the exchange
- The redemption price on maturity is based on the average of closing price of gold (of 999 purity) for 3 days prioir to maturity.
- Interest is taxable and there is no TDS applicable. There is no tax payable on capital gains received from maturity of the bond.
It can be bought in the form of jewelry, coins or bars from the merchant and from a bank.
- Gold jewelry cannot be considered as an investment due to the high overheads like making charges, wastage, etc.
- One could take a loan against gold jewelry at the bank.
- Overhead charges are higher when you sell the jewelry for cash. First, buyers melt the gold down. They do not pay for the style of the jewelry. Then, dealers must pay to melt the gold up to 30 percent of the value, to refine the precious metal. In the end, it is a buyer’s profit.
- With physical gold one has to be worried about security, storage and purity of the gold
The ideal form of investing in gold would be participating in the Gold Exchange Traded Fund (ETF).
- A long term capital gain on Gold ETF is 1 year.
- Gold ETF (Exchange Traded Fund) is kept in a Demat form, and one need not worry about theft / loss.
- Gold ETF tracks the price of the gold. Gold ETF is managed by the Mutual Fund and traded on NSE.
- Gold ETF can be sold back in NSE (Exchange).
- Purity levels of the gold are high as it is held in a Demat form.
- Gold ETF can be liquidated at any given point of time.
- In gold ETFs, investors track NAVs, which keep changing with gold prices. In e-gold, investors directly track the price of gold.
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