Gold Silver Reports — Street Sees Value in Sovereign Gold Bonds Amid Global Uncertainties — An uncertain global economy , low to negative rates in major countries, except the US, and equity markets at their peak make the latest issue of sovereign gold bonds (SGB) worth a buy , analysts said.
The fifth tranche of the SGBs opened on Thursday and is priced at `3,150 per gram. Analysts and money managers say demand for the bonds will remain strong despite the latest issue being the most expensive among all the five tranches announced so far. The issue price of `3,150 per gram is higher than the `3,119 per gram for the fourth tranche issued in July .
“The Report for gold continues to be bullish in the medium term as interest rates are still low in a majority of the countries. Even though US rates are headed upwards, quantitative easing in countries like UK, Japan and Europe have more than made up for it,“
The US Federal Reserve is likely to hike its target fund rate by the end of the year to follow its 25 basis point increase in December 2015.However, other large economies like Japan, China and most of Europe is struggling for growth.Risks to global growth have increased following Britain’s vote in June to move out of the European Union. All these factors support gold, which is considered a safe in vestment.
“Deflationary pressures are still there across the world. Brazil and Russia are contracting. Japan and China are struggling. It is only India and the US which is seeing some inflation. In this scenario, in vestments are tilted towards gold.
The fact that the latest bond price is also lower than the most traded JOHN ATKINSON GRIMSHAW listed SGB may also support de mand for the bonds. Gold bonds is sued in November and trading on the National Stock Exchange (NSE) ended at `3,203 on Friday , which is higher than the `3,150 per gram is sue price of the fifth tranche.
“With US rates on the way up, the rupee will also depreciate towards JO rupee will also depreciate towards `69 to `70 per dollar, which means gold will become more expensive in India. I expect gold to give 15% to 20% returns per annum for the next two to three years,“ from Neal Bhai said. — Neal Bhai Reports