Sovereign Gold Bond Scheme 2021-22: When to buy and when not to!

Published: May 14, 2021 at 3:33 pm

The finance ministry has announced the release dates of Sovereign Gold Bonds for 2021-2022. Six issues (tranches) are to be released. Thrice in May(!), once in July and twice in Aug. A discussion on when one can buy these when one should not.

There are at least three distinct ways in which investors approach gold. The majority of them (at least in India) accumulate it in physical form, typical jewels. Although some see it as an investment, it is a recyclable consumable. This accumulation can also be done electronically via ETFs, Gold Funds or Sovereign Gold Bonds.

The second approach is to track the price of gold for “some returns merely”. The third approach is to exploit the volatility of gold, add it to a portfolio of stocks and bonds, meticulously rebalance and track the volatility at the portfolio level. That is as a means of diversification and possible risk reduction. Also see: Will including gold in my portfolio help?

Sovereign Gold Bond Scheme 2021-22 Schedule

The Bonds can be purchased via scheduled commercial banks, Stock Holding Corporation of India Limited, designated post offices, NSE, BSE. This is the issue schedule for 2021-2022.

S. No.TrancheDate of SubscriptionDate of Issuance
1.2021-22- Series IMay 17-21, 2021May 25, 2021
2.2021-22 Series IIMay 24 – 28, 2021June 01, 2021
3.2021-22 Series IIIMay 31 – June 04, 2021June 08, 2021
4.2021-22 Series IVJuly 12-16, 2021 July 20, 2021
5.2021-22 Series VAug. 09-13, 2021Aug. 17, 2021
6.2021-22 Series VI Aug. 30- Sept.03, 2021 Sept. 07, 2021

When not to buy Sovereign Gold Bonds!

Those who want “some returns” from gold or for some gold exposure in their portfolio for “diversification” should not buy Sovereign Gold Bonds.  They are not liquid enough, you cannot sell them mid-way (unless you are ready to sell lower than the market rate of gold) and if you wait for them to mature, the returns can just about be anything!  Shown below is the 8-year rolling returns of gold USD and gold INR price per troy ounce from Jan 1979 to May 2021.


Eight year rolling returns of Gold per troy ounce in USD and INR from Jan 1979 to May 2021
Eight-year rolling returns of Gold per troy ounce in USD and INR from Jan 1979 to May 2021.

Since you cannot sell them freely, you cannot tactically book profits or rebalance systematically with these bonds. If you wish to do this, choose a liquid ETF with low price-NAV variations. A gold fund that invests in a gold ETF would be a better choice.

Who to buy Sovereign Gold Bonds

Use these only if your ultimate aim is to accumulate gold for a future need, say for a marriage. Sovereign gold bonds offer a tax-free, risk-free way to accumulate gold as long as your future gold purchase is more than eight years away. You also get 2.5% interest (taxable as per slab) on the initial gold value as a “thank you for trying to reduce gold imports” gift from the govt.

You can buy these bonds in the secondary market via a demat account from desperate investors looking for cash and willing to take a loss. This approach is risk-free because the bond tracks the price of 24-carat gold and at any given time and after eight years one could buy 22-carat jewellery

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