Should You Invest In RBI's Sovereign Gold Bond: What Expert Thinks

The conflict between Ukraine and Russia is continuing and influencing the gold markets. Globally, gold rates increased to around $1925/oz recently in the Comex gold futures. Meanwhile, the RBI, on behalf of the Indian government has opened the sovereign gold bond (SGB) scheme, which will be closed on March 4, 2022. Due to the Russia-Ukraine geopolitical tensions, gold rates have now reached around 18-month high range in India.

Presently, 24 carat gold rate in India is being quoted at Rs. 51600/10 grams. Significantly, the government has fixed the SGB price at Rs. 51090/10 grams. The subscribers who will pay online will get a rebate of R. 50/1 gram. As the global gold market is very volatile now, investors are skeptical, about should they invest in the SGB? Experts think SGB is one of the best gold investment options. With a storage cost-free, and making a charge-free gold investment, SGBs are completely safe, as these are backed by the RBI. Additionally, investors can earn 2% interest on this type of gold investment, which is unique in nature.

Expert's note

Vivek Bajaj, Cofounder StockEdge and Elearnmarkets, "The financial markets will continue to remain volatile due to the geopolitical crises. Gold is considered a hedging tool against inflation, and due to the conflict between Russia and Ukraine, inflation may rise in our country. Also, the Indian stock markets have been volatile due to ongoing tension between Ukraine and Russia. Thus gold is one of the alternative assets in which investors can invest in uncertain times as gold has a negative relationship with stock prices. When there is a rise in the prices of stocks, gold prices fall. On the other hand, when the stock prices fall, the gold prices rise. Also, in the event of the Russia-Ukraine conflict getting extended, inflation may increase."

Bajaj added, "One of the best ways of investing in gold is by investing in Sovereign Gold bond schemes as it is a low-risk investment and the Reserve Bank issues it on behalf of India's Government. So, we can conclude that investors may invest in the Sovereign Gold Bond Scheme during this time of geopolitical crises and uncertainty in the market."