Gold prices fall as RBI approves premature SGB redemption at over four-fold issue price
3 min read
Investors in Sovereign Gold Bonds (SGBs) are poised to gain from the sharp increase in gold prices, with the Reserve Bank of India (RBI) setting the early‑redemption value for the SGB 2019‑20 Series III at ₹15,310 per unit – more than four times the original issue price of ₹3,449 per gram.
Key Takeaways
- RBI set the early-redemption price for SGB 2019-20 Series III at Rs 15,310 per unit, over four times the original issue price of Rs 3,449.
- The bond, launched August 14, 2019, became eligible for early redemption starting August 14, 2026 after seven years.
- The redemption delivers a gain of about Rs 11,861 per unit, or roughly 343.9%, excluding accrued interest.
- A Rs 1 lakh investment at issue price (about 28.99 units) is now worth approximately Rs 4.44 lakh.
The SGB, launched on August 14, 2019, can be redeemed ahead of schedule starting August 14, 2026 after completing seven years. This redemption price delivers a gain of roughly ₹11,861 per unit, or about 343.9 %, not counting any interest accrued during the holding period.
For instance, an investment of ₹1 lakh at the issue price would have bought around 28.99 units, which are now worth approximately ₹4.44 lakh at the premature‑redemption price. This represents an absolute profit of about ₹3.44 lakh (excluding interest), translating to an annualised return of roughly 23.7 % over the seven‑year span.
SGB holders also receive a fixed interest of 2.5 % per year on the original amount, disbursed semi‑annually. Under the RBI’s rules, the bonds mature in eight years, with early redemption permissible from the fifth year onward on interest‑payment dates.
The RBI explained that the redemption price is derived from the simple average of the closing prices of 999‑purity gold for the three business days preceding the redemption date—August 11, 12 and 13—as reported by the India Bullion and Jewellers Association (IBJA).
Meanwhile, gold and silver slipped on Friday amid rising geopolitical tension after reports suggested the United States might impose unprecedented economic measures on Iran and maintain a blockade of the Strait of Hormuz.
On the Multi Commodity Exchange (MCX), October gold futures fell as much as 0.8 % (₹1,233) to ₹1,52,233. At the latest quote, gold was trading at ₹1,52,415, down ₹1,051 (0.68 %). The contract reached an intraday high of ₹1,53,200.
September silver futures also came under pressure, dropping to an intraday low of ₹2,32,454, down ₹2,993 (1.27 %). It later traded at ₹2,32,880, down ₹2,567, or roughly 1 %.
Market analysts noted that MCX gold is extending its downward move after being turned back near ₹1,55,500. Immediate resistance lies in the ₹1,53,000–₹1,53,500 band; a decisive break above could push prices toward ₹1,54,000–₹1,54,500. Support is seen around ₹1,52,000–₹1,51,500, with stronger support near ₹1,51,000.
Experts added that gold remains comfortably above its major exponential moving averages, although the MACD indicates weakening bullish momentum and the RSI has retreated from overbought levels, hinting at possible near‑term pressure.
For MCX silver, immediate support is placed near ₹2,32,000, followed by stronger support in the ₹2,31,500–₹2,31,000 zone. Analysts observed that silver has slipped below its 20‑day EMA, while weakening MACD and RSI readings support the chance of a near‑term trend reversal.
The contrasting movements underscore that, despite short‑term selling pressure on gold and silver driven by shifting geopolitics and global market conditions, SGB investors continue to enjoy robust long‑term gains.
