In a development that reinforces the attractiveness of gold-backed investments, the Reserve Bank of India (RBI) has fixed the redemption price of Sovereign Gold Bonds (SGBs) maturing on July 13, 2025, at ₹9,688 per gram. This redemption price delivers an impressive cumulative return of nearly 99.67% to investors who subscribed at the initial issue price, reaffirming gold’s position as a safe and rewarding asset class in volatile financial markets.
Key Highlights
- Redemption Price: ₹9,688 per gram
- Issue Price (2015-16 Tranche I): ₹4,991 per gram
- Total Return: 99.67% over 8 years (excluding the 2.5% annual interest)
- Scheme: Sovereign Gold Bond Scheme, Series I (2015-16)
- Issuing Authority: Government of India through RBI
Understanding the Sovereign Gold Bond Scheme
The Sovereign Gold Bond scheme was launched by the Government of India in November 2015 to reduce physical gold demand, control CAD (Current Account Deficit), and provide investors an alternative to owning physical gold. SGBs offer capital appreciation in line with the market price of gold along with a fixed annual interest of 2.5% on the initial investment, paid semi-annually.
Features of SGBs
| Feature | Details |
|---|---|
| Tenure | 8 years, with exit option after 5th year on interest payment dates |
| Minimum Investment | 1 gram |
| Maximum Investment | 4 kg (Individuals/HUF), 20 kg (Trusts) |
| Interest Rate | 2.5% p.a. (taxable), paid half-yearly |
| Capital Gains | Exempt from tax if held till maturity |
Returns Breakdown
Investors who purchased the first tranche of SGBs at ₹4,991 per gram in 2015 are set to receive ₹9,688 per gram on maturity this July. This implies:
- Absolute Price Gain: ₹4,697 per gram
- Price Return: 94% purely from gold price appreciation
- Total Return with Interest: ~99.67% (including cumulative interest over 8 years)
This return beats traditional fixed income instruments such as FDs (Fixed Deposits) and savings schemes, highlighting the dual benefit of SGBs – price appreciation plus assured interest income.
How the Redemption Price is Fixed
According to RBI’s notification, the redemption price is calculated based on the simple average of the closing price of gold of 999 purity over the last three business days preceding the redemption date, as published by the India Bullion and Jewellers Association Ltd (IBJA). For the current maturity, this average stood at ₹9,688 per gram.
Benefits to Investors
- No Storage Hassles: Unlike physical gold, SGBs eliminate risks and costs associated with storage.
- Sovereign Guarantee: Backed by Government of India, eliminating credit risk.
- Capital Gains Tax Exemption: If held till maturity, capital gains are tax-free.
- Tradability: Tradable on stock exchanges within a fortnight of issuance.
- Collateral Facility: Can be used as collateral for loans.
- Additional Interest Income: 2.5% annual interest enhances effective yield.
SGB Performance Over The Years
| Year of Issue | Issue Price (per gram) | Redemption Price (per gram) | Return % |
|---|---|---|---|
| 2015-16 Series I | ₹4,991 | ₹9,688 | 94% (price gain only) |
| 2016-17 Series I | ₹3,119 | ₹9,688 (if redeemed today) | 210% |
| 2017-18 Series I | ₹2,857 | ₹9,688 (if redeemed today) | 239% |
Returns are indicative based on current gold prices. Actual maturity values depend on prevailing market prices on redemption.
Why SGBs Are Gaining Popularity
The RBI’s data shows that the popularity of SGBs has grown significantly, with cumulative issuance crossing 120 tonnes in value terms since launch. Rising gold prices, tax benefits, and sovereign backing have contributed to this surge.
Investment advisors highlight that SGBs suit long-term investors seeking portfolio diversification with minimal liquidity needs. Moreover, amid geopolitical tensions and market volatility, gold remains a reliable hedge against inflation and currency depreciation.
Global Context: Gold as a Safe Haven
Globally, gold prices have surged due to uncertainties over geopolitical conflicts, fluctuating interest rate policies by major central banks, and inflationary concerns. Analysts forecast gold prices to remain firm, with targets ranging between ₹10,000-₹11,000 per gram in the next 12-18 months, potentially enhancing future SGB redemptions.
How To Invest In Future SGB Tranches
Investors can subscribe to upcoming SGB tranches via:
- Scheduled Commercial Banks (except small finance and payment banks)
- Designated Post Offices
- Stock Holding Corporation of India Limited (SHCIL)
- Recognised Stock Exchanges (NSE & BSE) via Demat
Challenges for Investors
Despite their advantages, SGBs are not without limitations:
- Liquidity Constraints: Trading volumes remain thin on exchanges.
- Market Risk: Redemption value is linked to gold prices, which can fluctuate.
- No Compounding: The interest is on the initial investment only, not on the market value.
Future Outlook
With the RBI announcing attractive redemption prices and the government keen on reducing imports by promoting financial gold products, SGBs are expected to remain a critical part of India’s gold monetisation strategy. For investors, this translates to a robust long-term option blending safety, tax benefits, and capital appreciation.
Financial planners suggest allocating 5-10% of one’s portfolio towards gold, preferably through SGBs or gold ETFs, to maintain asset diversification and hedge against macroeconomic uncertainties.
Disclaimer: This article is for informational purposes only. Investments in Sovereign Gold Bonds or any financial product should be undertaken after consultation with certified financial advisors. Past performance is not indicative of future returns. The publication bears no responsibility for decisions taken based on this news report.
