Are Gold Bonds a worthy investment?

By Team Gullak

Nov 13, 2024

6 min read

With over 146 tonnes of gold bought over 67 tranches, Gold Bonds are one of the most widely known gold assets. These gold bonds are government securities that track the live gold rate without actually owning physical gold. In today’s article, we will go through what gold bonds are, understand if they are a worthy investment and share the latest insights on the next tranche of gold bonds.

What is Gold Bond?

Gold Bonds are securities denominated in grams of gold. Gold Bonds generally open in 3-4 tranches throughout the year. 1 unit of gold bond is equivalent to 1 gm of gold. Gold bond investments have a 5 year lock-in window and an 8 year maturity period.

Benefits of Gold Bond Investment

The Gold bond scheme has 2 major benefits:

1. Gold bond returns: You get extra 2.5% interest on your principal amount

2. If you stay invested for 8 years, you get tax benefits on the capital gains applicable on the gold price appreciation.

How to buy gold bonds?

Gold bonds are available on all major bank sites when the tranches are open. To buy gold bonds online,

1. Log in to your net banking account.

2. Under the investments or e-services section, select ‘Sovereign Gold Bond’.

3. Complete the registration form and click on the proceed button

4. Enter the the quantity you want to buy and make your payment

5. After payment, you will be allocated the units equivalent to your investment

When is the next gold bond scheme?

While gold bonds are a very popular mode of gold investment, the extra 2.5% pa is expensive for the government to pay out. As per market experts, the Government will most likely discontinue gold bond tranches going forward, due to its complexity and expensive nature.

What’s next for gold bond investors?

What if there was a gold investment option that not only solves for lack of gold bond tranches but also provides higher returns than gold bonds?

Well, this is possible with Gullak Gold+.

With Gullak Gold+, your gold quantity increases by an extra 5% every year, i.e., 100 gms invested in Gullak Gold+ will become 105 gms in 1 year and 148 gms in 8 years, which is a whopping 50% increase in gold quantity.

Here are the key features of Gullak Gold+:

1. Gold price increase + Extra 5% gold pa

2. No lock-in period

3. Daily/weekly/monthly SIPs available & available throughout the year

4. Investments withdrawable as cash or gold coins or redeemable as jewellery at Gullak’s partner stores like CaratLane by Tanishq or Kalyan

How does Gullak Gold+ compare against the Gold bond scheme?

In this section, we will compare Gullak Gold+ against the Gold bond scheme across a variety of criteria.

Table: Gullak Gold+ vs Gold bond investment

In the above table, we can see that Gold Bonds have tax benefits if kept till maturity while Gullak Gold+ does not. However, even after considering this tax benefit, post tax returns of Gullak Gold+ are higher than returns of Gold Bonds. This is because the extra interest of Gullak Gold+ is in gold grams and gets compounded every year. On the other hand, the extra returns of Gold Bonds are in INR and they only benefit from Simple interest.

Concluding Thoughts on Gold Bonds

While Gold Bonds are a great way to invest in gold there are 3 major reasons why they might not be ideal for you:

1. Lock-in Periods: If you are someone who is not okay with long lock-in periods, the 5 year lock-in that gold bonds come with might be a problem for you.

2. Returns: While gold bond returns are higher than most other gold investments, Gullak Gold+ provides you with the highest returns on Gold. The extra 5% gold compounded annually might be a game changer for you.

3. With the news of gold bonds potentially being discontinued, Gullak Gold+ becomes the no.1 investment vehicle for investors who want to make the most out of their gold.