Sovereign Gold Bond matures at Rs 14,024 a gram, 4.4 times its 2018 issue price

Holders of the Sovereign Gold Bond 2018-19 Series III are to be paid Rs 14,024 for each gram when the tranche matures on Friday, 13 November 2026, the Reserve Bank of India said in a notice. Eight years ago they paid Rs 3,183 a gram, so the bond now returns 4.4 times its issue price.

The RBI arrived at the figure by averaging the closing rates for 999-purity gold that the India Bullion and Jewellers Association published on 10, 11 and 12 November. The central bank put out the price on Thursday, 12 November, one day before the final redemption date.

What a 10-gram holding brings

A buyer who took 10 grams at the full price in 2018 spent Rs 31,830. On maturity that holding is worth Rs 1,40,240, a gain of Rs 1,08,410. Investors who applied online and paid digitally had a Rs 50 discount and paid Rs 3,133 a gram, so their gain works out to Rs 10,891 on every gram.

Interest comes on top. The bonds carried a fixed rate of 2.50% a year on the amount first invested, credited to the holder’s bank account every six months. At the full price that adds up to about Rs 637 a gram across the eight years. The RBI’s guidance on the scheme says the last instalment is paid on maturity together with the principal.

Lower than the May exit price

The gold rate that decides the payout has fallen since May. Holders of this tranche could cash out early on 13 May 2026, and the RBI had set that premature redemption price at Rs 15,102 a gram, using gold rates of 8, 11 and 12 May. Those who stayed until maturity get Rs 1,078 a gram less, about 7.1% below the May figure.

Sovereign Gold Bonds are government securities that the RBI issues on behalf of the Government of India. They are counted in grams of gold but repaid in cash, not metal. The 2018-19 Series III was on sale from 5 to 9 November 2018 and was issued on 13 November 2018. Friday is its eighth anniversary, and both the redemption money and the final interest instalment fall due that day.