The VI tranche of SGBS issue opened on 24th October and will stay open till November 2nd 2016. The Government has given a festive discount and is giving a Rs. 50/- discount per gm and is offering @ 2957 per gram. The previous issues were at an average of the nominal price of gold.
They have reduced the interest rate from the previous issues from 2.75% to 2.5%.
Minimum investment is Rs. 2957 & maximum is Rs.14,78,500
Indians love gold and consider it an auspicious to buy it in diwali. The other option to buy gold is via physical purchase or via the Gold ETF (Exchange Traded Fund).
ETF has an advantage of liquidity and no upper limit of investment, whereas SGBS has an advantage of capital gains exemption and income on investment via the coupon.
Gold as asset is used as an hedge against volatility and inflation. There are gold lovers and gold haters, when there is uncertainty and no direction gold is considered a place to hide.
Indians love the principal protecting quality of gold and the attachment for gold is emotional rather than rational. Normal retail investors do not calculate the returns earned on gold as they would on any other instrument like a bank fixed deposit, bond or a stock.
Gold has returned about 12% last one year, has given about -1.33% last 3 years, last 5 years about 2.56%.
Currently we are not recommending to invest in gold but if in any case you are buying gold this diwali for long term, buy a SGSB instead of a coin.