Investments are necessary and advantageous. It creates a financial corpus that comes in handy to sail through uncertainties and emergencies. It lets you realise various goals on your bucket list. There are several investment options to choose from. Buying gold has been a default investment option for almost all Indians. Gold prices constantly change, and it enables you to realise reasonable gains.

Buying physical gold, though advantageous, comes with its challenges. You could face maintenance, storage, and security risks with physical gold. Sovereign Gold Bonds are Reserve Bank of India mandate certificates issued against grams of gold. It lets you invest in gold without taking on the hassles of physical gold. Following pointers explain how Sovereign Gold Bonds work:

• Buying Gold Bonds

As mentioned, Sovereign Gold Bonds are issued by RBI. They announce a subscription date every two to three months. There is a one-week window for buying Gold Bonds. You can buy them directly from the RBI website or through an RBI-authorised bank. Upon purchase, the Sovereign Gold Bond certificate is issued in your name.

• Quantity of subscription

As Sovereign Gold Bonds are issued against grams of gold, their subscription quantity is expressed in grams. As an individual, you can buy Gold Bonds of a minimum quantity of a gram and a maximum quantity of 4 kgs. Corporations and trusts can buy Golds Bond up to worth 20 kgs.

• Gold Bond pricing

Sovereign Gold Bonds are priced considering the ongoing gold price. The average closing prices of 999 purity gold of the last three days announced by the Indian Bullion and Jewellers Associated Limited are considered for calculation. 

• Interest payout

The Sovereign Gold Bonds scheme offers a competitive interest rate of 2.5% per annum. The interest income is calculated on a half-yearly basis. This means Sovereign Bonds confer upon both capital gains and interest payout benefits.

• Tenure

Sovereign Bonds are issued for a tenure of eight years. Upon maturity, your payout is calculated considering the average gold price of the last three days, as announced by IBJA. If you wish for a premature withdrawal, you can opt for it only after five years of the tenure. Your early withdrawal request gets processed on the days of interest disbursement.

• Resale

You can resell your Sovereign Gold Bonds. You can also resell your Bonds after 14 days of the initial subscription. The ongoing gold price decides the resale value. If you wish to sell your Gold Bonds in the stock market, it is possible to do so, given that you hold the Bond certificate in dematerialised form.