Despite the relief rally in equity markets, Sovereign Gold Bond prices have been moving up steadily on the NSE, with the government deciding against issuing fresh gold bonds.
Though trading volumes have been thin due to a lack of awareness, prices have rallied between 5 per cent and 7 per cent in the last two months.
Ever since the government introduced SGBs in November 2015 as an alternative to physical gold, prices have rallied.
Gold prices have jumped 14 per cent to ₹8,772 per gram on Monday from ₹7,658 on January 1, even though they touched ₹9,045 in the futures market. Globally, gold prices have breached the historic $3,000 an ounce and are trading at $3,100 an ounce.
Incidentally, the first SGB tranche was issued at a price of ₹2,684 per gram in November 2015 and was redeemed at ₹6,132 in November 2023 after its tenure of eight years. The last tranche of SGBs was issued at ₹6,262 per gram in February 2024.
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As per the RBI report, the SGB scheme has raised ₹7,227 crore from investors, with 146.96 tonnes of gold issued since its inception. Of this, 132 tonnes worth about ₹1.12 lakh crore is still held by investors. Of the 67 tranches issued, only six have been redeemed so far.
Besides the appreciation in price, the initial investment in SGB earned a fixed interest rate of 2.75 per cent per annum, which was later revised to 2.50 per cent.
Trivesh D, COO of Tradejini, said the uncertainty in the stock markets and the decision to scrap fresh SGB issuances has been pushing investors’ interest in this safe-haven product in the secondary market.
With fewer bonds available and rising gold prices, these bonds are attracting more investors even though liquidity remains a challenge, he said.
Nikunj Saraf, VP at Choice Wealth, said the performance of existing SGBs has been exceptionally strong as investors seek them due to limited availability, especially in light of gold’s robust performance under current economic conditions.
Looking ahead, with gold expected to continue its upward trajectory amid global uncertainties and a weakening rupee, the demand for SGBs is likely to remain strong, he added.
Sriram BKR, Senior Investment Strategist at Geojit Investments, said that while liquidity remains a concern in SGBs, investors’ appetite for gold can be gauged from the threefold increase in inflows into Gold ETFs year-on-year to ₹14,929 crore in the first 11 months of this fiscal.
Investors holding SGBs to maturity will benefit the most, given the rising uncertainty in the global economy, he added.
