Buyers Keep the Faith in Sovereign Gold Bonds

Investors who have earned stellar returns from sovereign gold bonds (SGB) over the years are largely holding on to them despite the option to cash out early, central bank data showed.

- Ram Sahgal

MUMBAI:

According to Reserve Bank of India (RBI) data, investors have encashed just around half a tonne out of SGBs against 14.7 tonnes eligible for premature redemption, at a time gold prices are close to record levels. Market experts said investors are reluctant to redeem these bonds since they believe that the prices will hit the ₹1 lakh per 10 gm mark due to global trade war unleashed by US President Donald Trump and the ongoing wars in the Middle East and Europe.

"There is a strong belief among investors that the price, driven by global factors, will hit the ₹1 lakh mark, so they are holding on despite making sweet returns," said Surendra Mehta, national secretary of the India Bullion and Jewellers Association (IBJA), whose rates the central bank uses to price the bonds.