Planning to Buy Gold Bonds? Add in Two Tranches

Long-term investors looking to allocate funds to gold could split their investment equally across the two tranches announced by the Reserve Bank of India for the second half of this financial year, according to experts.

Growing fears of a recession in the US and high domestic inflation necessitate adding gold as a portfolio diversifier. Here financial planners say investors should hold 10% gold in their overall portfolio and buy sovereign gold bonds (SGB) to reach that allocation.

The Reserve Bank of India (RBI) has announced only two tranches. of SGB for the second half of this financial year. The first tranche of the issue is open from December 19-23, and the second tranche is scheduled for March 6-10. For the first tranche, investors will have to pay 5,359 per gram of gold after the 50 per gram discount for digital payments. This is 212 per gram higher than the 5,147 per gram they paid earlier. in June this year. Over the last one year, gold prices have gained 10.9% in rupee terms, while in dollar terms they have lost 1%. The analysts ET spoke with said. investors could split their investments across the two tranches, as gold prices in the near term could be range-bound as the Federal Reserve (Fed) continues to hike rates, which could affect growth.

“In the near term, there is room for more downside, with further tightening expected, but the medium-to long-term outlook looks more constructive,” said Rahul Kalantri, VP (commodities), Mehta Equities, Rahul said that in the short term, gold will trade between 53,700 and 55,000 per 10 gram.

Fund managers believe the long-term outlook for gold is bright given the talks of a likely recession in the US, during which gold has historically performed well.

“The inversion of the US 10Y-2Y and 10Y-3M spread is portending a recession. A combination of recessionary conditions forcing the Fed to ease with inflation staying somewhat elevated will be extremely bullish for gold,” said Chirag Meh ta, chief investment officer, Quantum Mutual Fund.

 Chirag said it is a good time to buy gold given the 15% correction from the all-time high. price of $2,070 in March this year. Financial planners believe SGB should be bought as a diversifier and constitute 10% of the portfolio.

“Capital gains on SGB are tax free if held to maturity, there is an additional 2.5% interest and no storage cost or expense to hold these bonds, making it one of the best ways to take exposure to gold,” said Vivek Goel, co-founder, Tail-wind Financial Services.

Vivek said long-term investors adding gold to their portfolio with an objective of holding to maturity should buy SGB and split their investments between the two tranches. S-ET

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