Price mechanism of gold bonds may be revised to spur demand

The price mechanism of the Sovereign Gold Bond (SGB) scheme may be revised by the Reserve Bank of India to encourage better response form investors, as per reports. The scheme gives people the advantage to invest in gold but not actually own gold. It was launched last month, by the government to reduce dependency on gold imports, thereby control the current account deficit, as per reports.

The launch saw a luke warm response with Rs 246 crore being collected from 63,000 applications for 917 kg of gold as per reports. This response is being attributed by some market players to be affected by the current price mechanism. Currently, the base price for gold bonds is considered with a week lag. This year, due to many public holidays approaching during the time, people made applications over two weeks when gold prices dropped around 2 percent. So, the price of gold bond was higher than the market price of physical gold.

The government intends to sell Rs 15,000 crore worth of gold bonds by March next year, as per reports. Therefore, the central bank may assist this by altering the price mechanism.