Gold bonds shine on listing

 Indian investors who bet on gold bonds are a happy lot. The first tranche of this bond, which was issued in November last year, was listed on the bourses on Monday. While the face value of this bond is ₹2,684 (the issue price), it traded at ₹3,196 in NSE on Friday — a return of about 19 per cent since its launch. An investor in physical gold would have made a return of 15 per cent during this period. The difference in returns can be attributed to the additional coupon payment on these bonds of 2.75 per cent per annum. NSE recorded a daily average volume of 200-400 in these bonds last week.

This is not bad, given that only about 62,169 applications were received for a total of 915.9 kg of gold in the first tranche of the sovereign bond. Premium on gold bonds could be explained by the market’s bullish outlook on gold prices. All along, gold ETFs were the only route to invest in non-physical gold. But now, investors could look at gold bonds too. The tenure of these bonds is eight years, but you can exit before in the secondary market.

However, remember that if you do not hold the bond till maturity, you will be taxed for the capital gains made on it at your slab rate. On the other hand, if the bond is sold after three years, capital gains will be taxed at 20 per cent with indexation benefit.

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