Draft:Sovereign Gold Bond

Sovereign Gold Bond, abbreviated as SGB, is a government security issued by the Reserve Bank of India (RBI) on behalf of the Government of India. It is denominated in grams of gold and is linked to the price of gold in India. It is also an interest-bearing bonds, carrying an interest of 2.5% p.a. paid in two installments in a year.

The bond has an 8-year term with an option for early withdrawal through the RBI after 5 years. It's listed and traded on Indian stock exchanges, allowing eligible investors to buy or sell anytime through their dematerialization accounts. It can also be transferred to another eligible investor without redemption through the RBI.

History
The scheme was first notified by the Department of Economic Affairs on 2016-01-14 under the Government Securities Act, 2006. The initial subscription required a minimum of 2 grams and a maximum of 500 grams. It was open from January 18 to January 22, 2016. The bonds initially paid 2.75% interest per year, later reduced to 2.5% per year..

Eligibility
People residing in India, as defined in he Foreign Exchange Management Act, 1999 are eligible to invest in SGBs. These include individuals, Hindu Undivided Families (HUFs), universities, trusts, and charitable institutions. People who become non-residents after buying an SGB can still hold it until maturity or premature redemption..

The bonds are issued in 1-gram denominations and multiples thereof. Each eligible investor can purchase up to 4 KGs per financial year. A demat account is optional; bonds can be held in dematerialized form with a securities depository or tracked by the RBI.

Price
The issue price is the average closing price of 999 purity gold from the last 3 business days before the subscription period, as published by the India Bullion and Jewelers Association Limited (IBJA). The redemption price, for both early and maturity redemptions, is the average closing price from the 3 business days before repayment.

Comparison with other forms of gold investments
SGBs, purely as an investment format, can be compared to other forms of investing in Gold.

Issue history
''Note: CAGR calculations are without interest payments and post-tax, since capital gains due to appreciation in price of gold in SGB is tax free. ''