The second tranche (IInd) of the Sovereign Gold Bond (SGB) scheme for 2022-23 has opened for subscription today, August 22. The issuance of the bond will take place on August 30.

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The issue price for the same has been fixed at Rs 5,197 per gram. Online subscribers can, however, secure these bonds at a discount of Rs 50 per gram.

The issue price of the second tranche sovereign gold bond 2022-23 is based on the simple average value of the closing price published by the Indian Bullion and Jewellers Association (IBJA).

What is Sovereign Gold Bond (SGB)?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash, and the bonds are redeemed in cash on maturity.

Who is eligible to invest in the SGBs?

A person resident in India, as defined under Foreign Exchange Management Act, 1999, is eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

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How can one invest in SGB?

Those looking to subscribe to the SGBs in this tranche can apply through banks, Stock Holding Corporation of India Limited (SHCIL), stock exchanges NSE and BSE, designated post offices or through agents.

What are the minimum and maximum limits for investment?

The bonds are issued in denominations of one gram of gold and multiples thereof. Minimum investment in the bond is one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).

When does an SGB mature?

The bond's tenure is for eight years, with an exit option after the fifth year to be exercised on the interest payment dates.

What is the rate of interest, and how is it paid?

The bonds bear interest at the rate of 2.50 percent (fixed rate) per annum on the initial investment amount. Interest is credited semi-annually to the bank account of the investor, and the last interest is payable on maturity along with the principal.

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Is it the right time to invest in SGB? And what are the trends in gold prices?

Nish Bhatt, Founder and CEO at Millwood Kane International, said that investment in gold through SGB is a decent option as it provides liquidity, doesn't require any storage cost and is easier to redeem.

"Also, it comes with an interest coupon payable semi-annually," he said.

"Investment in SGBs has received a robust response. RBI has already raised a total of over Rs 25,702 crore from November 2015 till FY21," Bhatt said.

On gold prices, he said that the yellow metal is currently trading near a 3-week low, and the softness is largely due to the encouraging economic data set being reported by the US.

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"The strength of the dollar is also one of the reasons for the weakness in gold prices. Gold prices have risen around 8 percent a year to date in rupee terms. Moving forward, gold prices will be guided by the pace of rate hikes and unwinding of liquidity measures by global central banks to contain inflation," Bhatt said.