The ongoing issue of sovereign gold bonds open from 8 June 2020 to 12 June 2020 has brokers and agents outdoing each other by glorifying its benefits to the potential investors. Since there is enough and more being written how it is a not-to-be missed investment opportunity, this post is not about the “pros” of the issue but about the “cons” which no one seems to be discussing.

• The interest of 2.5% per annum is fully taxable.
• This is a simple rate of interest, does not compound.
• In case someone redeems this before maturity, it attracts capital gains tax.
• Though the bonds are tradable on NSE and BSE, the liquidity and pricing depends solely on the demand at that time.
• The actual gain depends on where the price of gold is at the time of maturity of the issue.

The objective of this post is just to highlight the few drawbacks of this scheme which one should be aware of along with the unique benefits it offers which make it a good investment option.  Please consult your financial planner/advisor to understand its suitability and the ideal allocation in line with your financial goals.

Disclaimer: The views and opinions expressed here are solely those of the writer and do not constitute any financial advice in any way nor suggest or promote investments in any products.