Increase your gold allocation through SGB: Experts

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The seventh tranche of the sovereign gold bond (SGB) scheme opened on Monday. Investment experts are advising this as an opportunity for investors to increase gold allocation.

The issue price has been fixed at Rs 4,765 per gram of gold. A discount of Rs 50 per gram from the issue price will be offered to those investors who apply online and the payment is made through digital mode.

Effective way for gold allocation

The Economic Times quoted wealth managers as saying that sovereign gold bonds are one of the most effective methods to buy gold if investors do not require constant liquidity. They outperform traditional methods such as purchasing actual gold, gold ETFs, or gold funds since the bonds are government-backed, pay 2.5% interest annually, and have no storage fees. Although the government has the option of buying back the bonds at the conclusion of the fifth year, many wealthy investors choose the product since capital gains are tax-free at maturity.

SGBs are an efficient way for gold allocation. Considering that prices could be soft, investors can stagger their investment over the next 4-5 months, Harshad Chetanwala, co-founder, MyWealthGrowth, is quoted as saying in the news report.

Gold prices

Gold has rewarded investors early in 2020 amid uncertainties around Covid-19. Gold is considered a hedge against inflation. Gold prices are projected to grow in the medium run as inflation is expected to rise due to supportive policies by governments and central banks.

The Economic Times quoted Chirag Mehta, fund manager, Quantum Mutual Fund, as saying that as cheap money becomes scarce, a debt or housing crisis could emerge, potentially affecting the entire economy.

Until March 2022, investors could spread their gold purchases among the four tranches of the sovereign gold bond issuances.