Buy Sovereign Gold Bonds from Secondary Market - What You Need to Know?

SGBs can be purchased from the secondary market via the NSE and BSE.

Price Determination: SGB prices in the secondary market are determined by demand and supply, similar to other securities. Typically, they trade at a discount to the spot price of gold.

Minimum Investment: Minimum investment amounts vary for individuals and institutions.

Individuals: Minimum investment is 1 gram.
Trusts, universities, and charitable institutions: Maximum investment is 4 kilograms per financial year.
Sovereign Gold Bonds Interest Rate:

Interest is paid half-yearly in April and October.
Fixed interest rate of 2.5% per annum.

Sovereign Gold Bond Tax Benefits:
Capital gains tax exemption after 8 years of holding.
SGBs can be used as collateral for loans.

Benefits of Buying Sovereign Gold Bonds from the Secondary Market:

Gold at Discount: SGBs trade at a discount to the spot price of gold, providing an opportunity to invest in gold at a lower price than the market rate. Buying SGBs from the secondary market can be a cost-effective way to invest, especially for those who missed out on the primary issuance.

Taxation: Investing in SGBs offers tax benefits. Capital gains from redemption are tax-exempt, while interest received is taxable. This applies to both primary and secondary market purchases.

Interest: Investors receive 2.5% p.a. interest on the face value of SGB, even when purchased from the secondary market.

How to Find the Best SGB Deal in the Secondary Market?
Track SGB prices on stock exchanges like BSE and NSE. Monitoring prices gives you an idea of the current market rate and discounts available. Currently, 63 SGBs are listed on stock exchanges.

Consider the interest factor when purchasing SGBs from the secondary market. Interest is provided on the issue price of the bonds, not the purchase price in the secondary market. Therefore, settling for the lowest trading price may not be advisable.

Process of Buying SGBs in The Secondary Market:

Find discounted/high-yielding SGBs.
Search the SGB scrip code in your demat account and place a buy order.
The bonds will be credited to your demat account within T+1 working day.

Should You Purchase SGBs from the Secondary Market?
Buying SGBs from the secondary market can be lucrative. Prices vary based on the remaining maturity period, and bonds with longer maturity periods often trade at better discounts. It can be a good option for investors looking to add gold to their portfolio at a lower price.

Final Words:
Sovereign Gold Bonds have made gold investment more accessible. They are available in both primary and secondary markets. Investors can benefit from purchasing SGBs from the secondary market, including tax advantages. The benefits increase when buying an illiquid series at a low trading price compared to the market or new issue price.

FAQs:

Should you buy SGBs from exchanges at a discounted price?
Buying SGBs from the secondary market is possible if you missed the primary issuance. However, investing may not be a good option if you can't hold the SGBs until maturity, as you won't get the tax benefit and may not receive the full value if sold before maturity.

What are the 5 key things to consider when buying SGBs from the secondary market?
Discount to the spot price of gold.
Liquidity of the SGBs.
Interest rate on the SGBs.
Maturity date of the SGBs.
Your investment goals and risk tolerance.

Why should I assess the liquidity factor when buying SGBs from the secondary market?
Assessing liquidity is important as it determines how easily you can sell the SGBs if needed. Illiquid SGBs may be difficult to sell quickly and at a favorable price, so evaluating liquidity before buying is crucial.

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