New Delhi: Government of India recently launched two new Gold schemes – Gold Bonds and Gold Monetisation. The schemes have been launched in order to curb the gold imports and also monetise on the available surplus of physical Gold in the economy.
Gold Bond Scheme
RBI will issue bonds on behalf of the government under this scheme. The annual limit for investment under this option will be set at 500 gms per person and the tenure of such bonds would range from 5 – 7 years. On maturity the redemption value will be decided based on the market price of the gold. However there is still no clarity w.r.t interest rates on the Gold Bond Schemes.
Gold Monetisation Scheme
The Gold Monetisation scheme will work on the principal wherein an investor will have to keep his physical gold as deposits against which a gold certificate will be issued. Even this scheme will offer an interest rate, however it is expected that the interest rate will not be more than 1.5% p.a.
Considering the emotional attachment which people in India have towards their physical gold holding especially jewellery, it is highly difficult to see an investor parting with his gold holding to make a way for gold deposit. Also the interest rate offered on the same is lower which may not motivate an investor to opt for the scheme.
Outlook
Considering the nature of the two new schemes we believe Bond scheme would be ideal for an investor who purchases gold purely from the investment point, so instead of purchasing physical gold he can opt for Gold Bonds. Whereas as Monetisation scheme would be suitable for investor who has bulk holdings in gold especially which is in the form of gold bar and coins.
Though lump sum returns from these scheme would be marginally higher as compared to returns from Gold ETF/Mutual funds, but it lacks the SIP/regular investment feature which will help gold mutual funds to earn higher risk adjusted returns in long run
(Author Anil Rego is CEO & Founder, Right Horizons. He advises on personal finance)
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