Updated February 13th, 2024 at 17:46 IST

Sovereign Gold Bond 2016-I matures with 13.6% return, outshines gold funds

Nippon India ETF Gold BeES achieves 9.31% growth, but lags behind Sovereign Gold Bond 2016-I returns.

Business Desk
Sovereign Gold Bond (representative) | Image:Pexels
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Sovereign Gold Bond: Sovereign Gold Bond 2016-I has reached its maturity date, providing investors with a notable 13.6 per cent return, surpassing the performance of gold funds over the same period.

The largest gold fund, Nippon India ETF Gold BeES, has recorded a compounded annual growth rate of 9.31 per cent from February 8, 2016, to February 8, 2024. However, it falls short compared to the returns offered by the Sovereign Gold Bond 2016-I.

Matured SGB outperforms

The recent Reserve Bank of India (RBI) notification disclosed that the final redemption price for the SGB 2016-I was set at Rs 6,271 per unit, calculated based on the average closing gold price for the week spanning January 29 to February 2, 2024.

Originally issued at Rs 2,600 per gram on February 8, 2016, the SGB 2016-I provided investors with a fixed annual interest rate of 2.75 per cent, later revised to 2.5 per cent.

Recent data indicates that the SGBs issued by the government, including the Sovereign Gold Bond 2015-Series-I, which matured on November 30, 2023, have consistently outperformed other forms of gold investment.

New SGB tranche

The RBI has announced the launch of a new tranche, Sovereign Gold Bond Scheme 2023-24 Series IV, available for subscription from February 12 to February 16, 2024. The issue price for this tranche is yet to be disclosed.

The pricing of SGBs is determined based on the average closing price of gold, as published by the India Bullion and Jewellers Association (IBJA) for the preceding three working days before the subscription period.

Investors subscribing online and paying digitally can get a discount of Rs 50 per gram on the issue price of SGBs.

SGB investment advantages

Financial experts recommend Sovereign Gold Bonds as the preferred method of gold investment for individuals willing to hold until maturity, citing benefits such as sovereign guarantees, tax exemption on returns, and fixed interest rates.

Moreover, SGBs do not entail credit risk and offer cost-effectiveness by avoiding expense ratios associated with gold funds and ETFs.

Experts advise investors to consider their investment objectives, risk tolerance, and preferences when choosing between Gold ETFs and Sovereign Gold Bonds, taking into account factors such as liquidity needs and taxation implications.

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Published February 11th, 2024 at 15:39 IST