What happened
The Reserve Bank of India (RBI) announced premature redemption prices for two Sovereign Gold Bond (SGB) tranches this week. SGB 2019-20 Series V, issued on 15 October 2019, was redeemable at ₹14,725 per unit on 15 October 2026.
SGB 2020-21 Series VII, issued on 20 October 2020, can be redeemed at ₹14,614 per unit. Because 20 October 2026 is a holiday, its redemption date moves to Monday, 19 October.
| Tranche | Redemption date | Price per unit | Averaging days |
|---|---|---|---|
| 2019-20 Series V | 15 October 2026 | ₹14,725 | 12, 13 and 14 October |
| 2020-21 Series VII | 19 October 2026 | ₹14,614 | 14, 15 and 16 October |
How the price is worked out
The redemption price is the simple average of the closing price of 999-purity gold (the purest grade) on the three business days before the redemption date. The prices are those published by the India Bullion and Jewellers Association Ltd (IBJA).
A simple average means you add the three closing prices and divide by three. The price is quoted per unit of the bond.
For the first tranche, the three days were 12, 13 and 14 October. For the second, they were 14, 15 and 16 October. That is why the two prices differ, even though the dates are only days apart.
When you can redeem early
Under the government notification governing each tranche, premature redemption is permitted only after the fifth year from the issue date. It can happen only on a date when interest is payable. So each tranche has a specific window rather than any day you choose.
What it means for you
If you hold one of these tranches, the redemption price is fixed by the three-day average, not by the gold rate on the day you apply. A sharp move in gold after the averaging period does not change the price for that date.
Jewellery rates differ from this benchmark. Retail prices quoted by jewellers vary by purity, taxes and demand, according to Economic Times reports. For instance, Tanishq’s 22k gold was reported at ₹13,635 per gram on 14 October, down from ₹13,730 the day before. Those are per-gram jewellery rates and are not comparable with the per-unit SGB price. You can check jewellery rates with our gold jewellery price calculator.
To judge how a bond has performed over its holding period, a CAGR calculator shows the annualised growth between your purchase price and the redemption price.
Background
The Sovereign Gold Bond Scheme lets investors hold gold in the form of government securities instead of physical metal. RBI issues the bonds on behalf of the Government of India and announces redemption prices as each tranche reaches its early-exit dates.
Read our separate reports on the Series V price and the Series VII price for the individual announcements.
