Reopening of bodily gold markets hits sovereign gold bonds’ demand

Reopening of physical gold markets hits sovereign gold bonds

The acquisition of sovereign gold bonds (SGBs) since April, pushed by lockdown-led demand, has subsided in tandem with the reopening of bodily gold markets.

Gross sales in August (6.35 tonnes) had been the best ever in a month for the reason that launch of SGBs in 2015.

Nevertheless, gross sales within the final three months, 6.623 tonnes, have fallen.

An SGB is denominated in gm.

Not solely that, gross sales of bonds in November, or the in Dhanteras and Diwali week, at 1.57 tonnes, had been the bottom since April, after the nationwide lockdown was imposed on the finish of March.

So, was the curiosity in gold bonds solely due to bodily gold not being out there?

With folks letting down their guard after the autumn in energetic Covid circumstances in India round Diwali, there was a bifurcation in demand for jewelry as consumption and demand for it as funding.

Chiragh Mehta, senior fund supervisor (different Investments), Quantum Mutual fund, mentioned: “Folks have made a bifurcation between funding and consumption. With the pageant season and marriages, there was an upsurge in demand of bodily gold and cash can be being spent on consumption shopping for. As traders will once more demand gold, they are going to come again to those environment friendly types of gold investing.” And there are takers for this argument.

Metallic Focus, London-headquartered bullion analysis agency, mentioned in its report on Dhanteras gold sale in India “funding merchandise demand on Dhanteras was subdued”.

Nevertheless, it added “there was sturdy demand for bridal jewelry, although with decrease common product weights. Sturdy demand in small cities was seen”.


The report was ready after speaking to jewellers throughout the nation. It mentioned often on the day of Dhanteras alone, 20-25 tonnes of bodily gold was offered in regular occasions.

Which means the sooner shift of demand for SGBs throughout lockdown has reversed in favour of bodily markets, and demand for funding has remained with SGBs.

The month-to-month information on gross sales of gold bonds means that November would be the weakest on this monetary 12 months, however they’re nonetheless a lot increased than the month-to-month common of the earlier two years.

Shekhar Bhandari, president and enterprise head (international transaction banking), Kotak Financial institution, mentioned: “The attraction of SGBs will proceed. Actual retail customers have subscribed to varied tranches as a part of allocation. They’d additionally been cautious and conservative on consumption. The previous four-six weeks have seen a major cash stream in direction of consumption and that’s the neatest thing to occur to the economic system. Fairness has re-entered the funding basket of the frequent man. SGBs have given greater than 35 per cent returns previously 12 months and proceed to be finest asset class.”

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