Sovereign Gold Bonds - Thematic Report - ICICI Securities

Gold prices in the last two years have had a phenomenal run, rising around 75% and continuing to scale new highs. Indian prices are trading well above Rs. 50000 per 10 grams. Global prices during the same period, have risen from US$1175 per ounce to US$1950 per ounce.

In the currently never before seen uncertainty and risk aversion environment, gold seems to be an appropriately placed asset class for global investors. Gold has not just seen higher buying interest during periods like current market turmoil, it has been a long term performing asset class, especially in the Indian context. Historically, over past five decades, larger uptrends in international Gold prices have lasted at least for three to four years. In current context we are only in second year of uptrend. We expect markets to maintain rhythm and continue uptrend for another couple of years.

We maintain our positive outlook on gold prices given uncertain outlook on global growth, volatility in other asset classes viz. global equity, commodity and currency markets, massive stimulus measures announced by major central bankers, extremely low interest rates environment & outlook, US-China trade war and increased buying interest of global central bankers.

SGBs offer a good alternative to take exposure to gold as it offers additional interest. There are no annual recurring expenses and capital gains arising on redemption of the sovereign gold bond scheme would be exempt from tax.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SovereignGoldBond_Aug20.pdf

Source : Equity Bulls

Keywords