Should you buy Sovereign Gold Bond 2023-24 Series III?

Sovereign Gold Bond (SGB) Scheme Series III opens for the financial year 2023-2024 on December 18, with the public issue closing on December 22. The SGBs applied for in this series will be issued on December 28. The issue price is determined based on the simple average of the closing price of gold of 999 purity for the last three working days of the week preceding the subscription period.

For the Series III, the nominal value of the bond is set at Rs 6,199 per gram of gold, and investors subscribing online and paying through digital modes will receive a discount of Rs 50 per gram, making the issue price Rs 6,149 per gram.

The tenure of SGBs is eight years, with the option of premature redemption after the fifth year. They offer a 2.5 percent interest per year, payable half-yearly, and are backed by sovereign guarantees, eliminating credit risk. The interest paid is taxed, but the capital appreciation at maturity is tax-exempt.

The article suggests that SGBs are a compelling investment for those willing to hold them until maturity, providing a unique avenue for diversification without the challenges of physical storage. They can be traded on the secondary market for liquidity if needed.

While the gold prices have increased by more than 10 percent in 2023, the article features experts who provide different perspectives on whether investors should go for the Series III or wait for the next series in February 2024. The decision may depend on factors such as the outlook for gold prices, geopolitical tensions, and central bank buying.

Financial advisors recommend having around 5-10 percent of one's portfolio in gold as a cushion in times of economic crisis. The central bank has also announced the date for the next series, SGB 2023-24 Series IV, which will be offered during February 12–16, 2024.