Why sovereign gold bonds failed to attract investors

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Sovereign Gold Bond (SGB) is proving to be a good option for investment. Even after giving double digit returns, gold bonds lost their sheen. Compared to the previous year, there was a decline of 46 percent in the investment of sovereign gold bonds in the financial year 2022-23. According to the data released by the ministry of finance, more than ₹ 7,100 crore was raised in the financial year 2023 through government gold bonds and gold monetization scheme. Whereas in FY 2022, this collection was more than ₹ 13,100 crore.

What is the reason? There are two main reasons behind this decline. First, there is no improvement in gold prices in the year 2022-23. Second is the expensive issue price of the bonds. The issue price for the gold bond installments in FY 2021-22 was between ₹ 4,777-5,109 per gram. Whereas in 2022-23, the prices of four installments were between ₹ 5,041-5,611. During this period, India’s gold imports fell by 24.15 percent to $35 billion due to high import duty.

According to Business Line, gold generally sees improvement from the July-September quarter, but this did not happen during FY 23. At the same time, the stock market continued to rise, dismissing the fear of recession, which had a positive effect on mutual funds. Experts believe that as the gold bond scheme is an 8-year scheme, people prefer to choose short term investment option and they are looking for it in equity and mutual funds.

What do experts say? Experts believe that SGB is a great option for investment. Even though there has been a decline in its collection, but there has been no decrease in the brightness of this investment. In this investment, you get double benefit in the form of gold boom and annual interest. Also, the benefit of Gold Bond is tax free. In such a situation, to protect your portfolio from risk, you should invest in Sovereign Gold Bonds.