Mumbai: The Sovereign Gold Bonds investors will be a hit with investors as they will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of the investment.
“This is a good interest rate that they are offering as compared to the policy that the government issued a decade back,” said Prithviraj Kothari of Riddhi Siddhi Bullion. He said for Indians who purchase gold as a tradition can now get a chance to earn a fixed interest rate along with the benefit of price appreciation.
The Prime Minister Narendra Modi had said, when announcing the launch of the Sovereign Gold Bond Scheme, that it is a secure and safe mode as it involves keeping a piece of paper issued by the banks that will sell the bonds, which no one will rob. According to the India Bullion and Jewellers Association Ltd, the price of bond will be fixed in Indian rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published.
The same procedure would be followed for calculating the redemption price for the bonds. The minimum permissible investment will be two units (i.e. two grams of gold). “With already a wave of new bank accounts being opened due to Jan Dhan Yojna, this minimum permissible investment gives an added advantage to reach the masses who can invest as low as two grams,” said Mr Kothari. “My personal feeling is that the scheme would be a huge success with the financial, safety implications that have been covered in alternative to holding physical gold at home,” he added.
Gold is still a sell on rallies he said. “The physiological levels of $1,200 is yet to be broken convincingly if we talk about it on a technical front. Fundamentally, lower the price the better the buying opportunity.” The gold prices were data dependent this week and ended in red as investor sentiment got eroded due to uncertainty in US monetary policy.
On Wednesday, the Federal Open Market Committee (FOMC) chose not to increase the federal funds rate but it did remove the prior concern over global growth and volatility.
This was largely interpreted in the market as hawkish, signalling higher rates from the Federal Open Market Committee’s December 15-16 meeting said Mr Kothari. The December meeting is the most anticipated one. There has been growth in US economy and as the Fed says it has been moderately paced. But the US cannot continue to long with with negative and is waiting for the right time.
Meanwhile the spot gold price was last at $1,1141.40/1,141.90 per ounce, down $5.70 on Thursday’s close. Silver prices followed the gold fall where the last recorded price was $15.57/15.62....