Gold price drop lead to the end of Sovereign Gold Bonds?

According to the sources, the Indian government is likely to reduce or discontinue the Sovereign Gold Bonds (SGB) because they are considered expensive. 

The report says this is due to the reduction in Gold customs from 6% to 15% when the Union Budget was presented in parliament. As the customs are reduced, demand for Sovereign Gold Bonds is expected to decline. Exchange dropped by 2-5% after the tax cut.

SGBs were first issued on November 30, 2105, and redeemed in 2023. The final repayment for the investors who participated in the SGB scheme 2016-17-series 1 in August 2016 is in August 2024. However, this sudden reduction of tax can affect their returns. The initial price of Sovereign Gold is Rs 3,119, and the annual interest rate is 2.75%. India Bullion and Jewellers Association Limited (IBJA)  reported that the average closing price of 999 pure gold is used to calculate the redemption price of SGBs before the redemption date. 

Although there have been no issues with SGBs since February this year, Gold import taxes have been increasing since 2012. The customs taxes increased from 15% to 10%  due to gold smuggling and other reasons.

Also read: Gold Prices Fall Again: Check Latest Gold Prices.