Gold and silver prices continue to trade lower due to a firmer US dollar index and a slight rise in US Treasury yields. Last week's non-farm payrolls reading caused markets to pare expectations for a rate cut, supporting the up-move in the Dollar Index and Yields. The focus today will be on US and India CPI data, which will test expectations of policymakers loosening monetary policy. Investors are advised to allocate at least 15% of their portfolio to gold for better risk-adjusted returns. The best option for long-term gold investment in India is through Sovereign Gold Bonds (SGB), which have an eight-year term and have provided high returns in the past.
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They offer investors a way to invest in gold without the need to physically own it. The Reserve Bank of India (RBI) announces the issuance of SGB tranches each financial year with specific issue and redemption dates. [7ebe6ea4]
Two SGB schemes launched in 2016 have already come up for final redemption this year. The article lists the details of these schemes, including their issue prices, maturity dates, and redemption amounts. It also mentions the tentative redemption dates for other SGB schemes launched in 2016-17. The redemption price of SGBs is calculated based on the previous week's average closing price of gold. The final redemption dates may change depending on bank working days and other factors, and the RBI will notify SGB investors one month before the redemption date. [7ebe6ea4]
India's sovereign gold bond scheme has been beneficial for retail investors and the economy. The scheme addresses the problem of India's love for gold, which leads to imports and widens the current account deficit. The scheme offers a risk-free option to diversify asset portfolios and provides an attractive rate of return. The first sovereign gold bond issued in November 2015 matured in November 2023, giving investors a return of about 150%. The bonds enjoy a capital gains tax break if held to maturity and are relatively risk-free compared to the stock market. The latest issue in February 2024 saw residents subscribe to a record 12.78 tonnes of bonds worth ₹8,008.4 crore ($966 million). The scheme has reduced India's import bill for gold and provided retail investors with another asset class for diversification. [a9f924be]
The Reserve Bank of India (RBI) has relocated over 100 tonnes of gold from the United Kingdom (UK) to its vaults in India for logistical and storage reasons. This move follows RBI's recent acquisition of 27.5 tonnes of gold, increasing its total gold holdings to 822.1 tonnes by March. The transfer of the gold was done for both logistical and diverse storage purposes, suggesting that more gold may be entering the country in the upcoming months. The RBI had 822.1 tonnes of gold at the end of March, with 413.8 tonnes held outside India. The Bank of England has long served as a warehouse for many central banks, including India. The RBI began buying gold a few years ago and periodically reviewed its storage options, leading to the decision to ship part of the gold to India. The relocation of 100 tonnes of gold required months of preparation and collaboration between the RBI, the finance ministry, and other government agencies. The gold was imported into India with a customs duty exemption, but integrated GST was still imposed on the imports. The move will help the RBI save on storage costs paid to the Bank of England. The gold is now kept in vaults in Nagpur and the former RBI headquarters building in Mumbai. [de2deada]
Nigeria is also taking steps to bring its gold reserves home in order to minimize risk associated with the weakening U.S. economy. The decision was made in April and is seen as a strategic move to safeguard the country's wealth and strengthen its financial resilience. Nigeria holds about 21 tons of gold in its reserves. The trend of repatriating gold reserves has been observed in other countries as well, with India recently repatriating 100 tons of gold from the U.K. Many central banks have expressed concerns about potential sanctions and are opting to keep their gold reserves within their country's borders. The move reflects a desire for greater control over financial assets and prudence in managing economic risks. The Federal Reserve's refusal to release information about the amount of gold in its vaults has fueled speculation about countries moving their gold out of the U.S. The gold repatriation trend highlights the importance of holding physical gold free from counterparty risk. [ff19f1c8]