Sovereign Gold Bond (SGB) investors are set to benefit from a sharp rise in gold prices, with the Reserve Bank of India (RBI) fixing the premature redemption price for the SGB 2019-20 Series III at Rs 15,310 per unit, more than four times the original issue price of Rs 3,449 per gram.
The SGB, issued on August 14, 2019, can be redeemed prematurely from August 14, 2026, after completing seven years. The redemption price represents an absolute gain of Rs 11,861 per unit, or around 343.9 per cent, excluding the interest earned during the holding period.
For example, an investment of Rs 1 lakh at the online issue price would have resulted in around 28.99 units, which would now be worth approximately Rs 4.44 lakh at the premature redemption price. This translates into an absolute gain of around Rs 3.44 lakh, excluding interest, with the annualised return from capital appreciation working out to roughly 23.7 per cent over seven years.
SGB investors also earned a fixed interest of 2.5 per cent annually on the original investment, paid semi-annually. Under the RBI’s framework, SGBs have an eight-year maturity, with premature redemption allowed from the fifth year onwards on interest payment dates.
The RBI said the redemption price was calculated based on the simple average of the closing prices of 999-purity gold for the three business days preceding the redemption date — August 11, 12 and 13 — as published by the India Bullion and Jewellers Association (IBJA).
Meanwhile, gold and silver prices declined on Friday amid heightened geopolitical uncertainty following reports that the US could impose unprecedented economic measures against Iran and continue a blockade of the Strait of Hormuz.
On the Multi Commodity Exchange (MCX), October gold futures declined as much as 0.8 per cent, or Rs 1,233, to Rs 1,52,233. At the last count, gold was trading at Rs 1,52,415, down Rs 1,051, or 0.68 per cent. The contract touched an intraday high of Rs 1,53,200.
September silver futures also came under pressure, falling to an intraday low of Rs 2,32,454, down Rs 2,993, or 1.27 per cent. It was later trading at Rs 2,32,880, down Rs 2,567, or around 1 per cent.
Market experts said MCX gold was extending its downside momentum after facing rejection near Rs 1,55,500. Immediate resistance is seen at Rs 1,53,000–Rs 1,53,500, while a decisive move above that range could push prices towards Rs 1,54,000–Rs 1,54,500. Support is placed at Rs 1,52,000–Rs 1,51,500, followed by stronger support around Rs 1,51,000.
Experts noted that gold remains comfortably above its major exponential moving averages, although the MACD indicates slowing bullish momentum and the RSI has reversed from overbought territory, pointing to possible near-term pressure.
For MCX silver, immediate support is seen around Rs 2,32,000, followed by stronger support at Rs 2,31,500–Rs 2,31,000. Analysts said silver had broken below its 20-day EMA, while weakening MACD and RSI indicators supported the possibility of a near-term trend reversal.
The contrasting developments highlight the strong long-term gains enjoyed by SGB investors even as gold and silver prices faced short-term selling pressure amid changing geopolitical and global market conditions.