Many investors think that gold is a perfect option to invest in because it helps you give reasonable returns, and there is always interest in gold as per the old traditions.

It is not so easy to buy and sell gold because you will have to bear the storage costs for lockers for that. After a while, gold ETFs came into existence, which helped the investors in trading gold on the stock exchange.

Here are somethings that you should know about the sovereign gold bonds:

What is a sovereign gold bond?

Sovereign gold bonds
Source: Tomorrowmakers

These gold bonds were introduced by the government in the year 2015 under the gold monetization scheme, which helps the investors to invest in the asset class, which is a great substitute for the physical gold.

There are various different subscriptions under this issue, which the RBI decided and declared.

Here are 10 features of the gold bonds:

1. Who is eligible to buy the sovereign gold bonds?

Sovereign gold bonds
Source: Business Today

Any resident can buy the bonds, including the HUFs, universities, charitable trusts, and trusts. The bonds can easily be purchased by the guardians or parents for the minors.

The only people who cannot buy the gold bonds are the non-residents of India.

If anyone has become an NRI and brought the gold bonds before, that can hold the bonds till maturity but cannot repatriate them and also cannot trade or exchange the bonds.

2. Denomination of the gold bonds:

Sovereign gold bonds
Source: PersonalFN

Every investment regarding the bonds will be denominated in multiples of grams.

It simply means that if you want to invest Rs 10,000, and the rate of gold is Rs 4,000 per gram during that time, then your investment will be for 2.5 grams of gold.

3. Maximum amount:

Source: Kotak Mahindra Bank

There is a limitation to the maximum amount of gold that you can hold as the sovereign gold bonds.

There are different categories for how much gold those people can hold in one financial year and how much it will cost.

4. Issued price:

Source: DNA India

The price of the sovereign gold bonds will be fixed in the Indian currency on average the closing rate of the last three days of the week for the subscription.

The people who pay for it through online or digital mode will have the issue price of gold less by Rs 50 per gram.

5. Interest rate:

Sovereign gold bonds
Source: The Hindu Business Line

The investors will be paid the amount on their initial investment, which is at the rate that is notified by the RBI at a particular time period.

Till now, the interest is near 2.5% p.a.

6. Redemption:

Source: Zee Business

The redemption price of the sovereign gold bonds are fixed in Indian currency which is Indian rupees and the price will be based on the simple average of the closing amount of the gold of 999 purity as per the previous three days of the payment and this is published by the Jewelers association limited and Indian Bullion.

7. Listed on the Stock exchange:

Sovereign gold bonds
Source: Time Magazine

The government has listed the trading of gold on the stock exchange, and these bonds will be held in Demat form.

This particular feature helps in easy trading of the bonds, and the person will be able to buy the bonds after the closing period of the subscription because of this rule.

8. Maturity for sovereign gold bonds:

Source: Sify

The tenure of the bond will be for a period of 8 years for people who invest in it, and they have an option to exit in 5th, 6th, and 7th year with the exercised interest payments.

A person won’t be allowed to redeem the bonds before the end of the 5th year, but they can transfer the bonds through the stock exchange.

9. The bonds can be used as collateral:

Sovereign gold bonds
Source: The Financial Express

The gold bonds can be easily used as the collateral for taking up loans. The loan value ratio will be set to the ordinary gold loan, which is set by the RBI.

It is a great option that you are allowed to use the gold bonds as security against loans like stocks.

10. Payment options:

Source: businessnewsdaily

The payment of the gold bonds can be made in cash, cheque or demand draft and electronic mode.

If there is redemption, then the amount will be credited to the bank account, but it is a great option that it can be made in cash.

How to buy the sovereign gold bonds?

Sovereign gold bonds
Source: The Economic Times

Whenever the government in India decides to announce a series of bonds, they give out all the information about the subscription, payments, date insurance, and per gram amount of the bonds.

There are two options that a subscriber can opt for the bonds: Physical mode and online mode.

Physical mode:

Source: The Economic Times

If you want to invest in gold, then you can easily go out and fill out an application for the gold, which is provided by the designated post office or the issuing bank itself.

You can also download the application from the RBI’s website and fill in the form. There are listed banks that will be receiving the application through agents.

Online mode:

Sovereign gold bonds
Source: Financeclap

If you are using the online mode for investing in gold, then you can go through with the help of a broker or a bank.

You will be given a discount for Rs 50 per gram if you go for the investment through the online mode and pay for it through the digital mode.

The applicant needs to provide the PAN card number and essential details to carry out the process through online mode, and it will easily help you in investing in the gold bonds.


If anyone is looking for a long term investment in gold, then they can go for the sovereign gold bonds instead of physical gold.

You do not need to pay any physical tax on the investment of gold bonds, but then remember that you will have to pay STCG tax on the stock exchange before the maturity period.


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