Want to Invest in Gold Bonds Scheme? Here's All You Need to Know

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Are you thinking of investing in gold? But at the same time you are worried about keeping physical this precious metal safe and secure? Well, if this is a situation then fret not. The UAE government has a new investment option in UAE for you that will certainly work in your favor.

If you are thinking of investing in gold, then you can consider the Gold Bond Scheme. The government has launched the Sovereign Gold Bond Scheme in order to provide its customer with a great alternative to physical gold. This is indeed the safest way to invest your hard-earned money especially during these times of market volatility.

To know more about Gold Bond Scheme, read this article till the end.

What is Sovereign Gold Bond Scheme?

Sovereign Gold Bonds are basically the government securities that are denominated in the multiples of grams of the yellow metal. The main motto of the Gold Bond Scheme is to inspire its customers to invest in paper gold rather than purchasing gold physically. Moreover, it offers a fixed rate of interest. Upon maturity, the Gold Bond owner gets the value of the bond in accordance with the current gold rate in UAE. Gold Bonds Schemes have been known to transform the demand for yellow metal as a physical asset into great financial savings. Besides this, Gold Bonds can also be utilized as a guarantor or collateral when you apply for a loan from any bank or financial institution.

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Sovereign Gold Bond Scheme Interest Rate

The UAE government has fixed an interest rate on Sovereign Gold Bond Scheme. All the investors are eligible to earn an interest rate on the Gold Bond Scheme investment. It carries an annual interest rate of 2.5%, which the investor will get every 6 months on the initial value of their investment. However, the rate of interest is subject to change as per the government policies.

How Much One Can Invest In Sovereign Gold Bond Scheme?

Sovereign Gold Bonds Scheme is issued in denominations of 1g of gold. Therefore, you can purchase the bonds in denominations of 5, 10, 50, or 100 g. Well, you can purchase a minimum of 2 g of gold and each person is allowed to buy a maximum of 500 g in a fiscal year.

It comes with a maturity period of 8 years but you can redeem or withdraw Sovereign Gold Bond Scheme after 5 years from the date it was issued. Please note that it will be considered a premature withdrawal.

Why Choose Sovereign Gold Bond Scheme Over Other Investment Option?

Between physical gold, Gold ETFs and Gold Bonds Scheme, here are some of the compelling reasons why should you invest in Sovereign Gold Bonds Scheme:

  • You’re assured of getting the current market price of physical gold at the time of redeeming Sovereign Gold Bonds.
  • The risk that is associated with storing physical gold is reduced by Gold Bonds as they are held in the Demat form.
  • It offers you an income from the interest rate along with the benefit of capital appreciation.
  • Making charges, locker charges, and the risk of lower purity are eliminated when you invest in the Gold Bonds.

Risk Associated with Sovereign Gold Bond Scheme

Gold is indeed one of the safest investments. Just like physical gold, the risk associated with Sovereign Gold Bond Scheme is very low. However, the gold rate in UAE depends on the market situation; any drop in the price of gold could increase the risk of capital loss. But it should be kept in mind that irrespective of the gold rate in Abu Dhabi, the unit of yellow metal held by the investor remains unchanged.

Why Sovereign Gold Bond Scheme Is the Best Long Term Investment?

There has been a significant increment in the gold rate in UAE. The gold rates have seen a 16.70% increase to AED 205.88 per gram over the last six months. It simply makes Sovereign Gold Bonds or physical gold is indeed the safest and best long-term investment option as the investors can expect a good return from it when compared to other investment options available in the market.

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